home buyer

Tips On Navigating the Home Buying Process for First-Time Home Buyers

If you’re a first-time home buyer, the home buying process can be a little nerve-racking. We’ve come up with a few tips to help you navigate the whole process and save you money:

Start saving early for a down payment: Although it’s common practice to put 20% down, many lenders now permit much less. In fact, there are programs out there that allow as little as 3% down. Keep in mind that putting less down may mean higher costs and paying PMI (private mortgage insurance). Contact one of our preferred lenders to help you land on a goal amount.

Some tips for saving for a down payment include setting aside tax refunds and work bonuses, setting up an automatic savings plan and using an app to track your progress.

Explore your options: There are a lot of mortgage options to choose from, each with their own combination of pros and cons. If you’re struggling to come up with a down payment, then look at these options:

  • Conventional mortgages that conform to standards set by the government-sponsored entities Fannie Mae and Freddie Mac, require as little as 3% down.
  • Federal Housing Administration loans, which permit down payments as low as 3.5%.
  • Veterans Affairs loans, which sometimes require no down payment at all.

Keep in mind that the amount you put down also affects your monthly mortgage payment and interest rate. If you want the smallest mortgage payment possible, opt for a 30-year fixed mortgage. But if you can afford larger monthly payments, you can get a lower interest rate with a 20-year or 15-year fixed loan. Contact one of our preferred lenders to help you determine whether a 15-year or 30-year fixed mortgage is a better fit for you. Or you may prefer an adjustable-rate mortgage, which is riskier but guarantees a low interest rate for the first few years of your mortgage.

Look at state and local assistance programs

Texas offers assistance programs for first-time home buyers with perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates. Your county or municipality may also have first-time home buyer programs.

Find out how much home you can afford

Before you start looking for your dream home, you need to know what your budget can really afford. Contact one of our preferred lenders to help you determine how much you can safely afford to spend.

Check your credit and don’t create any new activity

Your credit will be one of the key factors in whether you’re approved or not, and it will help determine your interest rate and possibly the loan terms.

So, if you haven’t already, check your credit before you begin the homebuying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit, such as making a dent in any outstanding debts.

To keep your score from going lower after you apply for a mortgage, avoid opening any new credit accounts, like a credit card or auto loan, until your home loan closes.

Always compare mortgage rates

One mistake first-time home buyers make is getting a rate quote from only one lender. This often leaves money on the table. That’s why we offer our home buyers a choice of lenders.

As you’re comparing quotes, ask whether any of the lenders would allow you to buy discount points, which means you’d prepay interest up front to secure a lower interest rate on your loan. How long you plan to stay in the home and whether you have money on-hand to purchase the points are two key factors in determining whether buying points makes sense.

Always get a preapproval letter

Another mistake first-time home buyers make is only getting a pre-qualification letter. This simply gives you an estimate of how much a lender may be willing to lend based on your income and debts. It’s much smarter to get a preapproval, where the lender thoroughly examines your finances and confirms in writing how much it’s willing to lend you, and under what terms. Having a preapproval letter in hand makes you look much more serious than buyers who haven’t taken this step.

Pick the neighborhood

Even if the home is right, the neighborhood could be all wrong. So be sure to:

  • Research nearby schools, even if you don’t have kids, since they affect home value.
  • Look at local safety and crime statistics.
  • Map the nearest hospital, pharmacy, grocery store and other amenities you’ll use.
  • Drive through the neighborhood on various days and at different times to check out traffic, noise and activity levels.

Stick to your budget

Although you can technically afford your preapproval amount, it’s the ceiling — and it doesn’t account for other monthly expenses. Always shop with a firm budget in mind and stick to your budget to avoid a mortgage payment you can’t afford.

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