First Time Home Buyer Expert Guide

First Time Home Buyer Expert Guide

Are You Ready To Purchase A Home?

Are you ready to purchase a home?  If your ready there has been no better time than no to get pre-qualified and start your search.  Owning a home has both lifestyle and economic benefits. In addition to the many tax advantages, the benefits of depreciation and your home increasing in value over time, there are additional advantages. You are not beholden to a landlord.  You are free to decorate, landscape and renovate your home to your hearts content.

As always there is a catch..How to afford to purchase your first home and can you afford to maintain that home and continue to live your life on your terms. One of the most fundamental principals in America is the dream of home ownership.  

Fortunately, the government provides some phenomenal options for the first time home buyer.  There are government backed mortgages available for first time home buyers that allow for very low down payments..

The Purchase Price Is Just The Beginning

Purchasing your dream home is an adventure and many times our eyes our bigger than our pockets. It is estimated by a Harvard report that over thirty nine million homeowners in the US really cannot afford the home that they live in.  That is a staggering number.

It is estimated that you should spend no more than 30% of your income on either rent or mortgage payments. In a study done in 2015 over 1/3 of US households spent more than that. According to the same report over 19% of homeowners spent more than fifty percent of their income on household costs. Many of these are due to inexperience or just not being aware of all of the costs involved in purchasing a home.  For expert advice and to see what you qualify for fill out the questionnaire  above or call 800-826-5077 to learn more. 

One of the costs that are often overlooked are the closing costs in purchasing a home. These costs are involved in every home loan transaction and you do not want to be surprised at the closing table.  Closing costs will typically run 2.5 to 4% of the purchase price no matter where you get your mortgage from. 

These costs include:
Title Insurance
-A fee for the title company to protect you against any future claims on your property.
Survey Fee- Typically done by title and charged to you
Inspection Fee -Fee to inspect your home. There may be separate fees for termite inspection and other specialty inspections.
Appraisal Fee -A fee to appraise your home. This is typically 3rd party to the lender today.
Recording Fees -Government Fees
Credit Report Fees -Bank fee to run your credit report. 
Underwriting and Origination Fees – A fee charged by the lender for processing your loan application
Wire Transfer Fees -Fee to wire the funds for your new home
and lets not forget about your moving fee, deposits on utilities and the cost of furnishing your new home, possible an HOA fee, homeowners insurance and the unknown cost of maintenance

Check today’s rates here:

Basic Explanation Of Mortgages

Ninety percent of today’s homeowners finance their home with a mortgage.  According to Wikapedia: ” A mortgage is ” a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt. “

Mortgage payments are made of of four parts: Principal, Interest, Taxes and Insurance (PITI).
Principal is the amount of money that you borrow from the bank.
Interest is what the lender charges you to borrow the money.
Taxes are property taxes paid to the state and municipality (and sometimes the county).
Insurance which can include homeowner’s,  hazard and for FHA and government backed loan, mortgage insurance.

Once you know your PITI, (On average nationally 1.15% ) you can use a calculator to estimate your monthly mortgage payments. Go to your FREE mortgage calculator HERE.

(In many home loans, the lender will include your property taxes with your mortgage payments, and pays them on your behalf. In other cases, you pay the taxes directly.)

Main mortgage types include the following:

A Fixed-rate mortgage : An interest rate that stays the same (fixed) for the life of the loan. This is the most popular type of mortgage. Most people want a mortgage that stays the same over the life of the loan so that they do not risk variable or high payments.

An Adjustable-rate mortgage (ARM) Is an interest rate that varies over the life of the loan based on some index like Libor or the Prime rate.  If you think that you are going to be in your house for a short period of time, you can save money with an Adjustable Rate Mortgage or ARM, but if interest rates go up, you will want to refinance to a fixed-rate mortgage. It is easier to budget monthly expenses with a fixed rate mortgage.

Government-backed mortgages are very popular loans today.  These loans include FHA, VA (Veteran Loans), USDA home loans and a myriad of other loans that are backed by the federal government. These loans are great for first time home buyers and Veterans. They are made by private lenders and mortgage banks.  Thanks to the federal loan guarantee, many of those guaranteed lenders make it much easier to qualify for these loans, with lower credit scores and downpayments required.  The interest rates and fees are typically lower as well.

You should also consider your payment term. If you can afford a higher payment you may want to opt for a shorter term to payoff your mortgage faster.  I usually recommend taking a little higher interest rate and a longer term.  Then you can make extra payments to the principal monthly and still payoff your loan early. In the event of a change in circumstance with work you can always stop making the extra payment and pay less monthly. This helps protect you for all kinds of unknowns that can come up in the years ahead.

In order to get a clear picture of which mortgage is right for you contact CambridgeHomeLoan.com HERE!

Renting vs. Buying

No  matter how old you are, being an adult can be shockingly difficult.  sure you can decide to eat dessert first, but what about all of those bills you have to pay.

And don’t rent payments feel like you are just handing over your hard earned cash to a landlord?
An alternative to throwing your cash away is to buy your own home.  It may be closer than you think.

The easy calculator below will show you how your rent check could look as a mortgage payment. As a bonus you’ll see how low the real cost of ownership can go.

 

See? When you put your dollars to work for you, adulting is not half bad. And it’s not too early (or too late) to start.

Reach out, and let’s talk about real numbers for your scenario. You may be pleasantly surprised.

Making a Down Payment

Almost all loans except for VA loans, USDA loans and 203H loans (loans made in a disaster area) require a down payment of some kind. If you qualify for a government back loan and this is your first home or if you have not purchased a home in 3 years you can qualify for a first time home buyer loan with only 3.5% down. For a conventional loan the down payment typically runs 20%. The advantage of a conventional loan is that you can avoid the PMI (Private Mortgage Insurance) that is required for government loans and typically runs 1 to 1.75% of the loan.

Preparing for your Home Loan
Check Your Credit Score

 

Your credit score also known as your FICO score as well as your current liabilities or credit payment history (other mortgages, credit card debt, student loans) are shown on your credit report.  This reports helps your lender determine how much you qualify for and your interest rate. 

To be ready to be qualified for a home loan today you should have a score of 580 or better. (620 during COVID) even for FHA loans

Remember that although credit services like Credit Karma are a great tool and i highly encourage using them, the risk based score run by your mortgage company is a different calculation. I have seen scores vary 100 points between a mortgage credit score and consumer credit score. It is best to know both and become familiar with anything on your report that may not be yours. If you see anything on your report that looks suspicious, contact the credit bureau immediately “in writing” and ask them to investigate or remove.

Although disputing items on your credit report is a good thing in normal circumstances, if you want to get a mortgage you will have to have those disputes resolved. Resolving them can actually lower your score and affect your loan.  For expert credit advice call CambridgeHomeLoan.com at 800-826-5077

Your FICO score is determined by pulling what is called a tri merge credit report. This report takes your middle score and that score is your FICO.  For example, if your scores are reported as 680, 710 and 740, the lender will use the mid score of 710 as your score.

If you apply for a mortgage with a co borrower, spouse or domestic partner, the lender will also check that person’s credit scores. the applicant with the lowest credit mid score determines how much the loan will cost or if you even qualify for a home loan. To see what payments look like check out our handy mortgage calculator Here!  Mortgage Calculator..

For the best mortgage Home Loan available today, Click Below!

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