Purchasing a Home is one of the biggest financial decisions you will make in your life. The process can be scary and overwhelming, especially if you have never bought one before. In a perfect world, you would commit to buying a home and get mortgage pre-approval before stepping foot into your first house. Obviously, it could be you did not realize you wanted to own a home until you see your dream home. Either way, shopping for a home can be a stressful experience. The Buyer’s agents at C4 Elite Real Estate Team are here for you and will answer all of your questions. Below find some tips as a First Time Home Buyer that will help make the process easier for you and your agent.
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Who is a First Time Home Buyer
According to The U.S. Department of House and Urban Development a first-time home buyer is an individual who meets any of the following criteria:
- An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time home buyers).
- A single parent who has only owned with a former spouse while married.
- An individual who is a displaced homemaker and has only owned with a spouse.
- An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
- An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.
First Time Home Buyer Benefits
There are 2 major advantages to being a first time home buyer:
- Qualifying for lower down payments through government-backed lending programs or offers from individual lenders
- Being able to deduct mortgage-related payments from your tax bill
Many first time home buyers find that down payments are the biggest obstacle to purchasing a home. Thankfully, some lenders offer home loans to first time buyers for down payments of as low as 3%. There are several loan programs for First Time Home Buyers. An FHA loan has a lower down payment requirement however, the borrower must purchase private mortgage insurance (PMI). This protects the lender in the event the borrower defaults on a portion of the loan. Fortunately for first time buyers, certain mortgage expenses are tax deductible. If you are a first time buyer, it’s worth consulting a tax specialist about how you can use your loan payments to reduce your tax bill.
Being a first time home buyer does not necessarily mean you will need to make a huge down payment. As long as you have a decent credit score and begin to understand the process, you should be able to come away with a mortgage to suit your needs. When comparing lenders, be sure to check out the 6 Questions to Ask Your Mortgage Lender blog on Day #4 or 30 Days to Buying a Home In Utah. Of course, always ask what they can do for you as a first time buyer.
First Time Home Buyer Tips
Pay off Debt
Owning a home is expensive—much more expensive than renting, even if your monthly house payment will be similar or cheaper than your current rent amount. That is because when you own a home, you are responsible for all the maintenance and upkeep costs. And those can add up fast! So, before you even think about buying your first home, make sure you have very little to no debt and have an emergency fund of three to six months of expenses in place.
Determine Your Budget
Before you get attached to a house, check your monthly budget to determine how much house you can afford. You need to leave room in your budget for monthly housing costs, including HOA fees, if applicable, taxes, and insurance, etc. Since property tax rates and the cost of homeowner’s insurance vary, check with your C4 Elite Real Estate agent, insurance company and lender for estimates to calculate how much house you can afford.
Save for a Down Payment
Paying cash for a home, especially the first time around, is mostly unrealistic. Rather you should try to save money to use as a down payment. If you can save 20% of the sales price for a down payment you will eliminate the need for to pay for private mortgage insurance (PMI). Additionally, your monthly payment can be reduced with a larger down payment.
Save for Closing Costs
Along with your down payment, you may also need to pay for closing costs. If you are a first-time home buyer, you may be wondering how much it costs to close on a house. On average, in Utah, closing costs are about 3–4% of the purchase price of your home. Your lender will give you a specific number so you know exactly what to bring on closing day. These fees pay for important steps in the home-buying process, including:
- Lender Fees
- Lender Title Insurance
- Credit report
- Homeowner’s insurance
- Pro-rated Taxes
Talk to your Real Estate Agent
Find homes you like online and send them to your real estate agent so they have a good idea of what you are looking for. Then they can use the multiple listing service (MLS) to find homes that meet your criteria in your desired areas. Your Buyer’s agent can also provide valuable market expertise and can help you find great deals on homes as soon as (or before) they are listed.
Make a Good Offer
Since you are already pre-approved for a loan, you are ready to make an offer. If you are a first-time home buyer, it may be hard to know how much you should offer. That is when you can rely on the expertise of your real estate agent. Ask your agent to help you make sure your offer is competitive but also within your budget and the home’s value. Your Buyer’s agent will help you to be careful not to make an impulsive offer that’s higher than you can afford. A personalized letter might help your offer stand out among multiple bids in a hot market.
Buying Houses is Fun
Whether this is your first time purchasing a home or you have been through the process multiple times, these are good tips to follow. Remember that the C4 Elite Real Estate Team is here for you when buying and selling. We have assembled a team of professionals to get you through the entire process, start to finish. Call today and we will get you set up on your automated search. Let’s go find you a great house in 2019.