Real Estate Search Direct

As a first time home buyer, there are many ways the government helps you get started as a home owner.  How can you afford to buy your first home?

Homer Buyer asked this same question.  He had heard that 20% was the minimum down payment required on a mortgage.  With home prices in his area being more than $300,000 he would have to save $60,000 for a 20% down payment.

Homer had promised himself he would buy a home once he finished college.  Homer had just finished his Masters degree in Computer Science.   He had a great new job starting at $85,000 per year.  Even if he saved every penny it would take over six months to save that much, after taxes.

And he had other expenses too.  He was renting a nice apartment suitable to his new station in life.  He needed to pay utilities and food.  A car payment, insurance and gas.  When he added it all up, he had less than $1500 per month to save for a down payment.  It would take him 40 months to save up for the down payment.

Homer didn’t want to live the next three years in an apartment saving for a down payment, all the while helping the landlord pay his mortgage.  Homer wanted to start paying down his own mortgage, instead.  He looked forward to the day he owned his own home free and clear, and wanted that day to come as soon as possible.  What was Homer to do?

Homer found out from RealEstateSearchDirect.com that he could get an FHA (Federal Housing Authority) insured loan with only a 3.5% down payment, and he could even borrow that money from family.  This was just what Homer had been looking for.

Homer also found out that there were other local programs to help him with closing costs.  Also, the Federal Government is offering a first time home buyer interest free loan of up to $7500 in the form of a tax credit repayable over 15 years.

To determine if you are ready to become a first time home buyer, here are some things to consider

• How much do you have saved for a down payment?
• How good is your credit score?
• How much monthly mortgage payment can you afford?
• What additional expenses will you have to pay as a home owner?
• Are you ready for the responsibility of home ownership?
• How long will you live in your home?

As Homer learned, there  are ways to reduce the required down payment.  He was able to start moving forward in a short time.

Before you think about getting a mortgage, you should be familiar with your credit score from all three credit bureaus.  Your credit score will play a big role in determining the interest rate you can get on a mortgage.  A small change in interest rate makes a big difference in the total paid over the term of the mortgage.

A good financial plan is essential to taking on the responsibility of home ownership.  Only you know all the details of your financial situation.  A lender or mortgage broker will ask you the basic questions about income and debt to satisfy their underwriting requirements, but it is ultimately your responsibility to pay the mortgage.

You should also consider what new expenses you will take on as a home owner.  As a renter, you may not have paid for things like maintenance, landscaping, garbage removal, in some cases even water or other utilities.  You will also have to pay property taxes, insurance, and often a monthly home owners association fee.

On the other hand there is also a considerable tax deduction for mortgage interest.

Another thing to consider is how long you will stay in the home.  Are you ready to settle down?  Do you have job stability that will keep you in the same area for the long term?  Are you expecting any changes to your family situation such as marriage, or children?

While it isn’t necessary to stay in the home you buy for the next 30 years, if you plan to move within the next 5 years or so, it may make a difference in the type of home you will buy.  Even so, don’t buy a home expecting to move in a few years with financing that will make it necessary to move.

To begin preparations of home ownership, you should talk to a mortgage broker to determine how much of a loan you can get with the monthly payment you are comfortable with.  Be sure to ask them about local and federal programs for first time home buyer assistance.  To take the next step and find a  mortgage broker, go to “Get A Loan”.

Allen Davis
RealEstateSearchDirect.com