First-time homebuyers tend to view the home buying process as an intimidating achievement. Since it covers a substantially large capital in negotiations, making mistakes can seem like the difference between living freely and living in constant fear of debt.
The trick to overcoming our fear of these long-term debts is to set preparations in advance. Remember that a knowledgeable consumer is a responsible one. Knowing what to expect with the home buying process will prevent you from making costly mistakes in your future financial responsibilities.
What To Expect As a First-Time Homebuyer
With any major purchase, it’s essential to understand what you’re working with. This includes assessing your cash flows, including monthly debts, income, and other assets. Knowing where you stand financially lets you look forward to planning your future.
Before you set out to look for a home to purchase, here are three tasks you should prepare for:
- Get your credit in good shape. Unlike saving for an expensive computer setup or even the latest iPhone, it’s unlikely you’ll be able to save up for a home purchase and pay it in full. Since buying a home will be a large purchase that will span for years, it’s vital to have an excellent credit score to have a better rate with your mortgage lender. Positive practices like paying your debt on time and keeping your debt to a minimum can contribute to a high FICO score or credit score. Your FICO score or credit score will define how dependable you are as a borrower. This allows the underwriter to gauge the risk you pose and will be reflected in the interest rate you’ll receive. With a lower credit score, you’ll most likely have higher interest rates per month throughout the loan’s payment period. For most conventional mortgages, it’s best to have a benchmark of 640 FICO. If you’re stuck in a financially difficult situation, you can still secure other loans that have lower credit-score requirements.
- Save for the initial down payment. Most home loans will demand an upfront 20% down payment to avoid paying for private mortgage insurance (PMI). If you can’t afford the 20% benchmark, there are lower down payment options and PMI will be an added charge to your home’s regular monthly mortgage dues. This will push you further to a more challenging financial situation if you already have poor credit scores to begin with. Thankfully, on a conventional loan, you won’t have to deal with the PMI for the entire duration of the mortgage term. Once you pay off 22% of the property’s equity, you can request to have your mortgage insurance removed and you’ll start having the standard mortgage payment per month. Conventional down payment options include as low as 3%. Additionally, some home buyers prefer to go the extra mile by going beyond the 20% down payment. This allows them to pay off their home faster and have more financial security in the future.
- Shop for the best mortgage plan for you. Once you have a home in mind and a compelling credit score, it’s now time to identify which home loan will work best for you. Ideally, it’s best to get recommendations from friends and colleagues, but you can do your own legwork by hiring a loan officer and a real estate agent. If you have low FICO scores, you can still shop for FHA and USDA loans, as long as you fit their restrictions. Cindy Steelman of Steelman Mortgages quoted “Keep in mind that these special loans will have advantages and drawbacks, depending on what you’re compensating for. This is why it’s always better to start with a good credit score to have broader options to work with.”
First Time Home Buying with Steelman Mortgages
Buying your first home is a complex long-term investment, which is why it’s best to avoid making mistakes even on your first purchase. Before you lock into a specific mortgage type, it’s best to compare your options with local mortgage providers. Doing so lets you find mortgage plans that can best suit your financial needs and limitations.
If you’re having difficulties with the home buying process as a first-time home buyer in Roseville, CA, you can benefit from signing up with our services. At Steelman Mortgages, we can answer all your questions about the home buying process and provide the right solutions for your financial needs. Contact us today at (916) 847-7263 so our mortgage experts can assist your home buying needs.
