How To Get Your Foot In The Real Estate Door
Is it an unrealistic goal to be able to buy a home in this market and afford to make the payments, as some say? Don’t just take their word for it, though. Everyone’s situation is different. This might actually be an ideal time to buy your first home, if you meet certain conditions. 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. Talk to a licensed and experienced Realtor in your area, or find an online mortgage calculator. It would be a frustrating waste of time to look at houses that you can’t afford, and it would be less than optimal to look at homes that are smaller than what you need. If you know what your price range is, you’ll start off on the right foot. 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.
No and low down payments are available and require little if any cash, from the buyer. The average down payment 20 years ago was about 20% but today some people are able to put down as little as four percent. 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.
You can buy a home with only 3.5% down if you can qualify for an FHA loan. That’s a very low down payment. FHA loans used have fairly low maximum amounts, putting them out of reach of buyers in expensive metropolitan areas. 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. Keep in mind though that borrowers who put down less than 20% are usually required to pay PMI (Private Mortgage Insurance) again depending on the loan program so keep in mind your particular circumstances always play a part in this process.
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.
What does all of this mean to you? 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.
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 new homes in San Diego. Builders will walk you through every step of the way, including applying for a mortgage.
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