Are you thinking about settling down and buying your first home? Congratulations! And, you’ve come to the right place. The process can be overwhelming for first-time home buyers, but we’re here to help you get organized.
If you’re just getting started, here are five things every first-time home buyer needs to know.
Start Saving for a Down Payment
It’s never too early to start saving money toward your down payment. It’s common for borrowers to put down 20% of the purchase price to avoid paying for private mortgage insurance, also known as PMI. There are a few mortgage options that allow for smaller down payments, which we’ll cover below. But, keep in mind that even a five percent down payment on a $200,000 home is $10,000. It adds up quickly, but a diligent savings plan will help you reach your down payment goal.
Determine Your Price Range
Before you start browsing home listings, you need to determine what you can realistically afford. Review your budget and current monthly expenses to find out how much you can spend on a home. Consider how different types of property can impact your future budget, such as a single family home versus a condo or townhome. Think beyond the monthly mortgage payments and consider maintenance, utilities, and miscellaneous fees like HOA membership.
Mind Your Credit
It’s good practice to regularly monitor your credit score, but if you haven’t checked in awhile, it’s extremely important to do so before you begin the home-buying process. Take some time to review your score and dispute any errors that could potentially lower your score. If possible, this is a good time to reduce any outstanding debt to give your score a boost.
After you review your credit report, hit the pause button on any new credit activity, including taking out a loan or opening a new credit account. This activity requires creditors to make a hard inquiry on your credit report and will lower your score a bit.
Explore Mortgage Options
Peoples Bank offers you a complete mortgage loan service through our Home Loan Center. We offer FHA, VA, and conventional financing. Let’s take a quick minute to break down each of these options.
FHA Loans are insured by the Federal Housing Administration in an effort to make it easier for low and middle-income borrowers to purchase a home. These loans require a smaller down payment (as low as 3.5%) and the standards for approval are more relaxed than those of a conventional loan. Essentially, the borrower pays an insurance premium to the FHA on the loan. This fee is included in the monthly mortgage payments.
VA Loans are insured by the Department of Veterans Affairs and are only available to qualified U.S. veterans, active-duty military personnel and certain surviving spouses. If you qualify for this type of loan, there are many benefits, including little to no down payment, no mortgage insurance, and better interest rates. You can learn more about who qualifies for VA loans here.
A conventional loan is financing that is not insured or guaranteed by the federal government. A conventional loan is a great option for a buyer with a substantial down payment and strong financial standing.
The friendly and professional team in our Home Loan Center has years of mortgage loan experience and is more than happy to help you navigate your home buying journey. Contact Peoples Bank to learn more today.