If you’re gearing up to buy a home, congratulations! Homeownership has represented the American Dream since our nation’s founding. However, buying a home is the largest investment most people will ever make, so it’s not a step to take without plenty of consideration. To be as informed as possible, you must conduct due diligence and understand your financial obligations both now and in the future. Here are six questions any first time home buyer should ask themselves before buying a home.
1. How Is My Credit?
Your credit score will impact the type of loan you may qualify for, and the interest rate affixed to that loan. If your score is above 700, you are considered to have good credit by many lenders. If your credit score tops 800, you can rest assured you are among the roughly 20% of Americans who have excellent credit. Anything below a 700 score is typically rated as fair credit. The better your credit, the more loan options you’ll generally have, and they will often have lower interest rates.
2. How Much Money Do I Have for a Down Payment?
For many years, the rule of thumb was that you needed 20% of the purchase price as a down payment. Today, that is not the case. On the contrary, first time home buyers often need less than half of that to qualify for a loan. To qualify for a Federal Housing Authority loan, known as an FHA loan, you may only need 3.5% of the purchase price of a home as a down payment. To put in context how little you may need to put down for a home, consider that 3.5% of a $400,000 home is just $14,000. Keep in mind that down payment assistance programs may be available to you as a first time home buyer. Your mortgage advisor will likely be able to point you to the right resources for possible down payment assistance.
3. Who Will Help Me with Financing?
It may seem counterintuitive, but it’s best to select a mortgage advisor before shopping for a home and even before selecting a real estate agent. Your mortgage advisor will not only secure your financing once you’ve found your home, but they will also help you to determine the right price range of homes that are within your budget. Moreover, if you have some flaws in your credit, they can provide suggestions for improving credit over time.
Make sure you work with a mortgage broker familiar with your market, and who has experience helping first time buyers to purchase a home. If you don’t know where to find a great mortgage advisor, ask your friends, family, and neighbors for recommendations.
4. What Is My Budget for a Home?
This question is often best answered with help from your mortgage broker, through a prequalification process. When you meet with a mortgage broker, they will ask for your income, your expenses, your credit score, and your debts. This will help determine how much you can afford to pay for a monthly mortgage payment. That number then is used to determine the total price of a home that fits your budget. Many people are pleasantly surprised to find that they can afford a more expensive home than they initially thought once they meet with an experienced mortgage broker.
5. Which REALTOR® Should I Work With?
As a first time home buyer, it is smart to have both a mortgage broker and a REALTOR® helping you purchase your home. Your mortgage broker will be able to recommend a helpful, successful buyer’s agent to work with you. You may also ask friends and family if they have used a local real estate agent who was professional and successful in helping them buy a home. Keep in mind that during the home buying process, you’ll be in frequent communication with your real estate agent, so make sure you like the person you choose.
6. What Features Do I Want in a Home?
Once you have your budget, it’s time to decide on the type of home and features you need. Will you take care of the outside yard and landscaping yourself, or would you be more comfortable in a condo where the association takes care of the exterior of your home? Do you want a garage for your car or storage, or are you comfortable with assigned parking? Do you love cooking, so you need a large, updated kitchen, or would you rather have large closets and a luxury bathroom? Make a list of features you want and be sure to include any absolutes (you need a fenced yard for pets, you need the bedroom on the first floor, you want a home in a certain school district, etc.).
First Time Home Buyer Loans in Oregon
Strategic Mortgage Solutions has helped countless buyers throughout Oregon to secure financing for their first home. As a longstanding, reputable mortgage brokerage, we offer access to a wide variety of loan products to meet your home financing needs. To schedule a free, first time home buyer consultation, call us at 541-275-1148, or contact us online. We look forward to helping you to achieve the American Dream of homeownership.
