As first time home buyers, you might not be able to afford a mansion. But there is no reason why you cannot get a home that ticks all of your boxes. However, before you start searching for properties, you need to first get pre-approved for a mortgage loan.
First Time Home Buyers: Look at Your Different Options
People who qualify as first time home buyers are not only people who plan to purchase their very first homes. People who have not owned a principal residence in the previous three years are also regarded as first-time homebuyers.
That is good news. After all, first-time buyers gain several advantages. For instance, first-time homebuyers can often access down payment assistance programs and meet flexible qualification requirements.
And an advantage of a first time home buyers mortgage is that eligible first time home buyers can qualify for down payments for as little as 3%.
In fact, first time home buyers have a number of options to help them purchase their first homes. For instance, many lenders that offer low down payments. Also, first time home buyers can get good deals by getting Federal Housing Authority-backed mortgages. These are geared towards first time home buyers.
First-time purchasers should also look at the following.
The HUD’s Resource List
The United States Department of Housing and Urban Development does not provide grants directly to individuals. But it does grant funds that are earmarked for first-time homebuyers to organizations that have tax-exempt statuses.
The Federal Housing Authority’s loan program is part of the HUD.
Individual Retirement Accounts
Every first-time homebuyer can withdraw up to $100,000 from their Individual Retirement Accounts without having to pay the 10% fee for early withdrawal that others do.
That means you could use funds from your IRA to pay towards your down payment. However, be aware that you must use those funds for a home purchase within 120 days of withdrawing the money.
State Programs for First Time Home Buyers
Many states in the U.S. have programs that assist with down payments and closing costs for qualifying first-time homebuyers. These, include Ohio, Washington, and Illinois. Eligibility is often based on your income and the purchase price of the property you want to buy.
Native American Options
If you are a Native American first-time homebuyer, you can apply for a Section 184 loan. You would need to pay a 1.5% loan upfront guarantee fee and a 2.25% down payment for mortgage loans over $50,000.
Shop Around to Find the Best Deal
OK. You have looked at the above options and determined whether you qualify for any of them. Now it is time to shop around to find the best mortgage deal.
As mentioned above, some lenders enable first-time homebuyers to provide down payments for as little as 3%. So, do not underestimate just how important shopping around is.
Even if you get an FHA loan, you could pay different fees. That’s because banks, mortgage brokers, and credit unions might charge charge different fees.
Be Cautious with Your Spending After Being Pre-approved
Once you are preapproved for a mortgage, you may think you have nothing more to worry about. But some spending after pre-approval can affect your credit score. These include buying a new car or making another large purchase. These purchases could cause your loan to potentially fall through at the last minute.
So, avoid making any major purchases that could affect your credit score until you have actually purchased your home.
Getting Your Dream Home as First Time Home Buyers
You may have to compromise on what you consider to be your dream home as a first-time homebuyer. Let’s face it, most dream homes are very expensive and out of the reach of first time home buyers. But you can typically find a great home that will serve you well for years to come.
Furthermore, you have the opportunity of buying a more dream-like home if you look for properties that need work done to them. You can then get a bigger and better property for a lower cost.
You probably will not be able to afford all the fix-up costs as soon as you move in. But if you are willing to live in a place that needs a little work done, you can slowly fix your home up over time.
In a few years’ time, you really could end up with the home of your dreams.