Editorial Contribution courtesy Unison Marketing Outreach
Homeownership is both highly rewarding — and highly stressful. As you navigate the process to select your first home and obtain your first mortgage, there are some steps you should know to help you prepare. Walking into the purchase process with the knowledge you need can help you secure the best available property and rates with minimal hassle. Here’s what you need to know.
Types of First Time Home Buyer Programs
Much like college applications, the things that make you stand out can be an asset in your first-time mortgage approval process. There are especially good deals for those who have served in the military, worked in public service, live in rural areas, or have time and patience to shop foreclosures. Some programs that may help you include:
- FHA loan: Federal Housing Authority loans are designed to support those with weak or shaky credit, also offering lower starting interest rates.
- VA loan: The Veterans Administration offers loans without a down payment to qualify military personnel and their families. These loans are designed for a home you live in, not rent to others.
- USDA loan: The United States Department of Agriculture offers 100% financing on rural properties. You do not need to own a farm or work in other agricultural fields.
- Fannie and Freddie: Government-sanctioned lenders who offer conventional loans with just 3% down.
- State first-time homebuyer program: State by state special offers on home loans.
- Good Neighbor Next Door: A HUD-sponsored program, offers up to 50% discounts for first responders and educators like EMS, firefighters, and teachers. You must commit to living in these properties for at least 36 months.
- Dollar Homes: The government will occasionally sell off foreclosed homes for as low as $1. This is a way to find an extremely affordable house, but note that there will be other expenses typically involved beyond the simple sale price and different types of financing requirements. These listings can also be rare in many areas.
Understand your Credit Health
Knowing your credit health before you start home shopping is an important first step in buying a home. Before you pick out a home, you’ll want to know what your price range and monthly payments might be. The best way to do this is by knowing your credit health and seeking a pre-approval. There are many online services that you can use to check your credit. While negative marks on your credit report aren’t always a deal breaker, it’s good to be aware of items that may lower your score so you can start from the best place when applying. If your credit is poor, it may be a good idea to work with a credit counselor first.
Organize Your Documents
No matter what state your credit health is in, a mortgage broker will want to look at your documentation. Gather pay stubs and tax information. Download statements from your retirement plan or stocks if you have any. List larger assets such as cars and debts such as medical or student loans. The mortgage process will go much smoother with all your documents in order.
Get a Pre-approval
Using your credit and income, a mortgage professional can help you get a pre-approval. This is essentially a letter that says the bank is very likely to loan you x amount of money towards a home. A pre-approval can put you near the front of the line in a competitive market and will simplify the purchase process. Even with a preapproval, though, you will still need to apply and be approved by a mortgage lender during the underwriting and closing process.
Plan for Extra Expenses
Purchasing a home often has extra expenses beyond your mortgage payment. You may want to save money towards a down payment to lower your monthly costs or open up a larger price range to shop. There are often fees associated with inspections and closing costs. In competitive markets, you may use a cash incentive.
Choose the Perfect Home for You
Finally, don’t look for the perfect home for tv, look for the ideal home for you. Find a property that is a size you feel comfortable maintaining, has the features you enjoy, and is at a price you can manage. Choose a neighborhood you will enjoy living in for at least 3-5 years. By picking a home that fits YOU best, you’ll be happier and more financially secure.