Yesterday I celebrated my four year anniversary of closing on my first home. I didn’t expect to own a home at 23 years old, but I am beyond grateful the seed was planted in my head and I explored my options and ultimately found out it WAS possible for me. Many people continue to rent or live with their parents not knowing the process of getting approved and in a home is easier than they think. I sat down with Fairway mortgage banker Michael Benton to ask some questions about getting in to your first home:
What is the biggest misconception about financing your first house?
There are many misconceptions regarding financing a home but the most common would be with the down payment. A majority of borrowers believe you have to have a 20% down payment in order to purchase a home. There are several loan options that require a substantially less down payment, and for first time home buyers most states offer mortgage programs that assist with down payment and/or closing costs.
What is the first step when purchasing a home?
The first step is to speak with your mortgage lender and determine how much you can afford. Nothing is worse then falling in love with a home that is out of your price range. Getting pre-approved prior to home searching will save you and your realtor a lot of time and effort. I might put in that you should do a family budget to determine what payment fits the best within the budget.
[Getting lots of valuable information from Michael Benton]
What kind of loan do most people receive?
The three common mortgage loans widely used are: Conventional, FHA, USDA. No one borrower is the same, and so these programs should be selected based on how well the loan products meets their overall financial goals. During the loan application process the loan officer will help determine what the best program would be based on each specific clients overall financial picture.
How much money do you need as a down payment?
Each mortgage program requires a certain percentage of the loan to come from the borrowers own pocket or a gift. Conventional loan requires as little as a 3% down payment for first time home buyers, but generally requires 5% for all other loan purposes. FHA requires a 3.5% down payment, and USDA requires “NO” down payment. Please consult your mortgage lender as your down payment could change depending on your mortgage loan purpose and qualifications.
What advice would you give to someone on the fence about continuing to rent versus buying?
I would say have a great understanding for your current financial situation and what your wanting to accomplish. The number of years you plan on staying in the area will help determine whether you should buy or continue paying rent versus paying a mortgage could be considerably less than you think. Also, consider the pros and cons of owning versus renting i.e upkeep, privacy, building equity etc.
Your lender should be able to provide you with a Buy vs. Rent analysis and a Cost of Waiting analysis to better help you make your decision.
[My first home in 2013]
Getting approved and moving in to my first house was one of the most fun and rewarding times of my life. I have now spent four years building equity rather than paying a landlord and getting nothing in return. Getting pre-approved doesn’t cost a penny and has no obligations, so why not call Michael and see where you stand today. Your dream home might not be as far away as you think!