Buying your first home can be intimidating, but it doesn’t have to be.
With the right information and the right mortgage team on your side, you can become a homeowner, possibly sooner than you think!
Who Qualifies as a First Time Homebuyer?
According to the U.S. Department of Housing and Urban Development (HUD), you qualify as a first time homebuyer if:
- You haven’t owned a principal residence for at least three years. If you have owned a home, but your spouse has not, then together you qualify as first time homebuyers.
- A single parent who was formerly a homeowner while married to an ex-spouse.
- A displaced homemaker who has only owned a home with a spouse.
- Anyone who has only owned a property that was not in compliance with state and local building codes, where bringing the property up to code would cost more than constructing a new comparable property.
Do First Time Homebuyers Qualify for Extra Perks?
Buying your first home comes with lots of perks, some available only to you as a first time homebuyer. There are tax benefits and unique mortgage options set aside exclusively for first time homebuyers.
Tax Benefits
Homeowners general enjoy tax benefits, like deducting their mortgage interest payments at tax time. You will also be able to deduct your property taxes, private mortgage insurance fees, and any points and fees you pay to obtain your mortgage origination.
Federally Backed Loans and Grants
First time homebuyers have access to federally backed mortgage options through the FHA. These options include:
- Closing cost assitance
- Down payment assistance
- Lower down payment
- Down payment grants
Down Payment Options
First time homebuyers have many options for down payments. A few of your options are:
- Exemption from the 10% penalty if you want to withdraw from your IRA for your down payment
- Down payment options of 3.5%, 3%, 0.5%, or even 0%, depending on which programs or grants you qualify for
- Down payment assistance in the form of a loan or a grant
If you aren’t sure what you would qualify for, talk to a loan officer! To find out why your credit score matters, check out this article.
Steps to Buying Your First Home
If you are thinking about buying your first home, there are a few steps to take before you begin shopping.
Evaluate Your Financial Health
Get an idea of what mortgage options will be available to you by taking a look at your financial health. Look at your savings and figure out how much you are ready to use for a down payment and closing costs.
Check your credit score. If it’s below 670, you may want to take a few months to focus on bringing it up in order to qualify for the more favorable terms.
Talk to a Loan Officer
After you have an idea of your budget and your overall financial health, the next step to buying your first home is talking to a loan officer. They will be able to help you anticipate what types of mortgages will be available to you and whether now is the right time to apply.
Get Pre-Approved
Next, apply for pre-approval! It’s important to do this first, before looking for a home. In order to make a competitive offer on a house, having mortgage pre-approval in hand is an absolute must.
This pre-approval will also give you a firm boundary for your budget to help you decide which homes on your wish list represent a realistic price for your financial situation. A pre-approval letter will be your best friend as you search for your first home.
For more information about buying your first home, or to take steps toward mortgage pre-approval, contact us today!
