Buying a home for the first time home buyer can be daunting. Everyone wants to give you advice which may not be accurate or apply to your particular needs. The first thing you need to consider is whether or not it makes financial sense for you to own rather than rent. You can get a better idea by speaking with a Realtor®, or you can start by speaking with a mortgage specialist. Before you start looking, you want to know what you can afford and what loan products are out there.
The Federal Housing Authority (FHA) loan product might be one to consider. There are loan limits depending upon the state where you are purchasing, income limits, the debt to income (DTI) ratio has to be at a certain level, and 100% of the down payment must come from the borrower’s funds.
In addition, an appraisal on the home you want to purchase must be done by an FHA certified appraiser, who will complete a report with FHA specific items on it. Minimum property standards must be met. Any deficiencies are noted on an FHA appraisal and must be fixed prior to closing.
Conventional loan products are also available, but usually require a larger down payment than an FHA loan. Many first time home buyers find it difficult to meet the larger down payment requirement. If you have not been able to save for a down payment or haven’t owned a home before to build up equity, this probably isn’t a practical financing option.
If you are a teacher, police officer, fireman, or have served in the military, there may be some special loan products available that can be found locally and offered by other banks, municipalities, or private organizations.
A popular special loan product for first time home buyers is the Veteran’s Administration (VA) loan. You must first get a certificate of eligibility from the VA and give it to a loan officer to begin the loan process. As with the FHA loan, certain criteria must be met and there are guidelines to follow.
A professional loan officer or mortgage specialist will know about the loans available for first time home buyers and which one is best for you. S/he can help to relieve some of the stress and anxiety involved with purchasing a home. And if you don’t know one, speak with a Realtor®. A good buyers’ agent should have a list of qualified professionals that they can recommend.