You’ve had enough of the apartment life. You’re finally looking to move into a home. That said, you’re new to this process. As such, you’re looking or a little advice.
Fortunately, you’ve come to the right place. This is the ultimate first time home buyer guide.
Odds are, you’re going to have to buy your house with the help of a mortgage. Note, though, that in order to secure a mortgage, you’re going to have to meet some requirements. These requirements will vary based on the type of mortgage you pursue, with some being quite stringent and others being fairly lax.
We’ll review the requirements for different types of mortgages below.
Conventional mortgage requirements can vary a bit. Note, though, that most require a minimum down payment of around 5%. As far as credit scores go, conventional mortgages generally require a minimum of 620.
The higher your down payment, and the higher your credit score, the greater your interest rate will be. It’s wise to put down 20% and have a credit score of at least 720, if possible.
FHA loans are sponsored by HUD or the Department of Housing and Urban Development. These loans are designed for low and moderate-income individuals, as well as those with poor credit scores.
If your credit score is higher than 500 but lower than 580, you’ll have to put 10% down on your home. If your credit score is higher than 580, you’ll only have to put 3.5% down on your home. Note, the higher your credit score, the lower your interest rate will be.
If you’re looking to buy a home in a “rural” area, you should consider a USDA loan. These loans require no down payment and are geared toward low and moderate-income families.
There is no official credit score limit for these loans. However, lenders generally want you to have a 640 credit score or higher.
These loans generally carry fairly low-interest rates. As such, they might very well be the best options for you.
Adjusted Rate Mortgages
The mortgages discussed above generally establish a consistent interest rate from year to year. Adjusted rate mortgages, on the other hand, possess interest rates that fluctuate over time.
So, while adjusted rate mortgages could potentially save you money, they could also end up costing you money. They’re quite risky and are completely at the mercy of the market.
For more information on these mortgages and others, talk to a mortgage broker like Tina Chumley.
If you’re a military veteran, you can opt for a VA loan. These loans have no minimum credit score and come with interest rates that are much lower than those associated with FHA, USDA, and conventional loans. There’s also no down payment requirement, so you could conceivably obtain one at any time.
Understanding First Time Home Buyer Programs
There are a number of first time home buyer programs out there, many of which will assist you with down payments and closing costs. Some of these are sponsored by states and municipalities, while others of these are sponsored by private organizations. To get the greatest deal possible, you’re advised to look into these programs.
Call up the housing department for the municipality in which you hope to live. Give a call to the state’s housing department. Mention that you’re a first time home buyer and that you’re wondering if there is any financial assistance available. In the right situations, you could end up scoring as much as $15,000 toward the cost of your house.
Buying a Fixer-Upper vs Buying a Home That’s in Good Shape
Odds are, when you’re scoping out homes, you’re coming across a variety of fixer-uppers. These homes are currently in poor condition but might be able to benefit from some critical updates.
The question is: are they worth it? Or would you be better off with buying a home that’s already in good shape? There are pros and cons to each, all of which we’ll discuss below.
Buying a Fixer-upper
Fixer-uppers are almost always cheaper than homes that are in good condition. As such, they have the potential to be bargains. This depends on how much updates end up costing. Depending on the circumstances, this can be just a little or quite a bit.
Of course, fixing up a house is an intensive process. Not only will it delay the amount of time it takes you to get into your home, but it will also saddle you with a lot more work.
However, because you get to dictate the updates, you get to decide on many of the home’s decor characteristics. This isn’t true when you buy a home that’s already in good shape.
Buying a Home That’s in Good Shape
Buying a home that’s in good shape is undoubtedly going to cost you more money than is buying a fixer-upper, at least initially. However, there will be no doubt about what you’re getting into. Your mortgage rate will be set and you’ll be paying the same thing every month for the foreseeable future.
Plus, because your home won’t require any additional work, you’ll be able to move in as soon as you’ve closed on it. This can be hugely beneficial in situations where you have nowhere else to stay.
The biggest downside of this option is that it limits your ability to make custom aesthetic updates. You could, of course, but it would end up costing you quite a bit more money.
The First Time Home Buyer Guide Will Serve You Well
Don’t leave your first home purchase to chance. Take advantage of this first time home buyer guide and you’ll end up with the home you’ve always dreamed of, at a price that you can afford.
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