Things To Consider for First Time Homebuyers
- Credit Score
- Loan Options
- Interest Rates
- Closing Costs
Thinking about buying your first home? Now may be the best time to invest in your dream home. Mortgage rates are at historic lows right now. Understanding all of your options is crucial to acting fast during this time. Between understanding the market to industry jargon and local options, buying your first home doesn’t have to be a daunting task. Here to go over the top four things to consider when purchasing your first home is Robert Brown with Rock Mortgage.
What is the most important factor for a first time homebuyer to consider?
Knowing your credit score is crucial. A credit score is a three-digit number that
represents the information in your credit report. It is a number lenders use to determine
your creditworthiness, meaning whether or not they should lend you money. You will get
better mortgage rates with a score in the mid-seven hundreds. However, it is not a
deal-breaker to be lower.
For folks with lower credit scores, what are some loan options they can consider?
Loans like the FHA, VA, USDA and HomeReady accommodate folks with lower credit scores. The FHA will accept credit scores as low as 500 with a down payment of 10% or more. You will need a 580 score to make the minimum down payment of 3.5%. VA loans are a great option for eligible active duty or retired military veterans. There’s no down payment requirement, no official minimum credit score requirement and no mortgage insurance premium. USDA loans are designed to help low-income buyers purchase homes in mostly rural areas. Although the official credit minimum is 640, the USDA provides exceptions for scores as low as 581. The Fannie Mae HomeReady program allows for a down payment as low as 3% with a minimum credit score of 620. However, a low credit score on a Fannie Mae loan may cost you much more than it will with other loan programs.
Another important factor is to get pre-qualified. What does this mean?
When you get pre-qualified, that is an indication you are a serious buyer. A great first step is to identify a mortgage lender you trust and you work well with. Then, begin the pre-qualification process with them. You will be submitting a preliminary application to a lender. They will review your credit score, income, and other factors, and tell you what loans are available to you. Getting pre-qualified helps you find out how much a lender will give you, at what rate, and what the terms look like. Being pre-qualified is a smart way to go into the home buying process so you don’t waste time looking at homes that are out of your budget.
When you talk about interest rates, what do you mean and how does it affect your home
Interest rates are a very important factor when deciding on whether or not to purchase a home. Interest rates fluctuate, so it is smart to buy when they are low. That way, you pay less money over time. There are also different types of mortgages with different interest rate structures. The most popular and common type of loan is a 30-year fixed rate mortgage. Right now, China has slowed investing in our real estate market, so our mortgage rates have dropped. We are experiencing historically low interest rates right now, so it is a great time to purchase a home.
What are closing costs and is that something folks should be concerned about?
I see first time home buyers surprised by closing costs all the time. Closing costs are additional expenses a home buyer pays at the very end of the home buying process. Along with your down payment, you’ll be expected to pay closing costs. On average, closing costs are about 3–4% of the purchase price of your home. Your lender will give you a specific number so you know exactly what to bring on closing day. These fees pay for important steps in the home-buying process, like for the appraisal, home inspection, credit report, attorney fees, and homeowner’s insurance. Depending on the deal and terms of the purchase, sometimes you can negotiate the seller paying closing costs.
If folks are interested in purchasing a home for the first time, what should they do?
Purchasing your first home is a big step, but it doesn’t need to be a stressful process. Having a good team around you to support and guide you through the process is so helpful. I would identify the right realtor for you and the right mortgage lender. Getting your dream team together could save you thousands of dollars. I encourage you to visit our website
To learn more about the first time home buying process and to get pre-qualified to see how much home you can afford, click here. You can also connect ith them via phone at 479-321-3355 or social media: Facebook & Twitter.