Is it an unrealistic goal to be able to buy a home in this market and afford to make the payments, as some say? If you meet certain conditions you could be able to get into your first home even in this market.
But what do you need to know before taking the plunge? A few simple steps can make sure you are on the right track to buying your first home, even in this market.
Before you do anything else, you need to know how much you can realistically afford. Use an online mortgage calculator or speak with a licensed Real Estate Professional. Knowing before you shop is always a great idea and helps insure you are getting the best deal possible. A good Realtor who is familiar with your local market can help you find the best homes in your price range and help you through the loan application process.
You also need to know what your credit score is. Your credit score along with your available down payment will play a role in determining what interest rate your will have for your loan. Also the more you have available as a down payment will reduce your loan amount which in turn will reduce your monthly payment.
If you don't have a lot of funds available, don't worry. There are loans available with low down payments, and even some with no down payment. Many of these will require very little cash up front from the buyer. Today buyers are able to purchase a home with as little as four percent down. Compare that to the average down payment of twenty percent 20 years ago. Here's where your particular circumstances come into play. The down payment required depends on many factors. Look for a special loan that allows you to buy with little or no cash down. No down payment loans can be challenging to find in today's market. Again your circumstances will determine what you qualify for. If you are a veteran you can probably qualify for a VA Loan but low down payments in the form of FHA loans are also available.
The FHA Loan is a low down payment mortgage that requires only a 3.5% down payment. Home buyers in high cost areas used to be unable to get FHA loans because of their relatively low maximum balances. Fortunately the limits have been increased to more than $700,000 in some high cost areas. Many first time buyers have not saved up enough to make a 20% down payment, so an FHA loan with only 3.5% down is an ideal solution. Mortgage insurance is often required if the borrower puts less than 20% down, depending on the loan program. Make sure to consider the cost of this mortgage insurance in your monthly payment.
Borrowers can usually cancel PMI once they reach a certain level of equity in their home. Again this depends on your loan program but is usually between 20 and 22 percent. Keep in mind lenders are required by law to cancel PMI when the equity you have reaches 22% however you can contact the lender and request the PMI be cancelled after you hit 20%.
Putting less than 20% down also frees up that money for other purchases such as new furniture for your new home or you can save it for future payments, debt consolidation or your child's college education.
The bottom line? There are resources available, especially through the government, to help first time buyers get into a home. Take advantage now while the opportunities are so good and home prices are low.
But what do you need to know before taking the plunge? A few simple steps can make sure you are on the right track to buying your first home, even in this market.
Before you do anything else, you need to know how much you can realistically afford. Use an online mortgage calculator or speak with a licensed Real Estate Professional. Knowing before you shop is always a great idea and helps insure you are getting the best deal possible. A good Realtor who is familiar with your local market can help you find the best homes in your price range and help you through the loan application process.
You also need to know what your credit score is. Your credit score along with your available down payment will play a role in determining what interest rate your will have for your loan. Also the more you have available as a down payment will reduce your loan amount which in turn will reduce your monthly payment.
If you don't have a lot of funds available, don't worry. There are loans available with low down payments, and even some with no down payment. Many of these will require very little cash up front from the buyer. Today buyers are able to purchase a home with as little as four percent down. Compare that to the average down payment of twenty percent 20 years ago. Here's where your particular circumstances come into play. The down payment required depends on many factors. Look for a special loan that allows you to buy with little or no cash down. No down payment loans can be challenging to find in today's market. Again your circumstances will determine what you qualify for. If you are a veteran you can probably qualify for a VA Loan but low down payments in the form of FHA loans are also available.
The FHA Loan is a low down payment mortgage that requires only a 3.5% down payment. Home buyers in high cost areas used to be unable to get FHA loans because of their relatively low maximum balances. Fortunately the limits have been increased to more than $700,000 in some high cost areas. Many first time buyers have not saved up enough to make a 20% down payment, so an FHA loan with only 3.5% down is an ideal solution. Mortgage insurance is often required if the borrower puts less than 20% down, depending on the loan program. Make sure to consider the cost of this mortgage insurance in your monthly payment.
Borrowers can usually cancel PMI once they reach a certain level of equity in their home. Again this depends on your loan program but is usually between 20 and 22 percent. Keep in mind lenders are required by law to cancel PMI when the equity you have reaches 22% however you can contact the lender and request the PMI be cancelled after you hit 20%.
Putting less than 20% down also frees up that money for other purchases such as new furniture for your new home or you can save it for future payments, debt consolidation or your child's college education.
The bottom line? There are resources available, especially through the government, to help first time buyers get into a home. Take advantage now while the opportunities are so good and home prices are low.
About the Author:
Many homes on the market today are short sales, which take a long time to buy. Another option is to buy new construction, like these San Diego new homes. Builders often help their buyers in obtaining home loans.
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