F inancial planning is an essential part of buying your first home. Luckily, there are many financial options available to first-time homebuyers. However, with many requirements and specifics to consider, it can take time to figure out what’s best for you. Here, we outline several ideas and provide you with everything you need to know before making an informed decision. Irrespective of whether you’re looking for a loan or want to know more about homebuyer and down payment assistance programs, this guide will pave the way forward. If you’re ready to take the plunge into homeownership, read on!
The United States enjoys a robust and prosperous real estate market, where construction efforts continually keep up the supply. Home builders invest in modern communities without skepticism – the American economy and its financial system are doing their best to keep demand steady and predictable. Because of this, new and affordable homes are dotting the map, providing Americans with autonomy and freedom.
But suppose you are entering the market for the first time. What are your prospects, and how do you sift through a seemingly endless palate of options?
Homeownership is a big decision
Before making up your mind to buy a home, there are several factors that you’ll need to consider. A home purchase is likely one of the most significant financial decisions you’ll make in your lifetime, so it’s essential to ensure you’re ready for everything. From maintenance and repairs to mortgage payments and property taxes, there are a lot of potential costs to be aware of before signing the contract.
It’s also essential to think about your long-term plans. Are you planning to stay in the same area for a while, or do you think you might move soon? What are the real estate trends for the region, including the price of rent, property appreciation, and competitiveness?
Outlining different financial options
There are many financial options available to first-time homebuyers. One popular path is to secure an FHA loan, which can help you secure financing with a lower down payment. However, loans come with interest and other associated fees, so it’s essential to understand the terms before signing on the dotted line. Due to the recent FED interventions, interest rates have increased, hovering around 7% for a 30-year fixed period. They are expected to raise rates more, which is why looking into buying down the rate or for homebuilders that do, is important – a lower rate can drastically lower your monthly mortgage.
Conversely, some families take advantage of other programs with down payment assistance to lessen this burden, which helps with the initial costs of buying a home. These programs are easy to find online and are typically sponsored by the state or federal government. Check out this list of down payment assistance programs in every state.
Depending on the program, a homebuyer can find help with financing options that help with the down payment, closing costs, and other related expenses. In addition, some of these programs have less stringent credit requirements than traditional mortgage products, making them a good option for those with less-than-perfect credit scores.
Overall, home assistance programs can be a great way to save money on the purchase of a new property and the ongoing mortgage costs.
How to secure loans and assistance programs?
Like securing financing for a home, assistance programs may require an application process that may be stressful. Be sure to check with financing professionals for information and ask for help. It’s also a good idea to get paperwork ready early so the application process goes smoothly. This usually entails a couple of Tax Returns, recent pay stubs, information about outstanding debts, and details about any extra income you make.
The extra work may be a pain, but assistance programs generally favor first-time buyers, veterans, public servants, and families within a lower income bracket. If you qualify, the savings will make it well worth your effort; they could be the reason you get qualified for financing and become a homeowner.
FHA loans from the Federal Housing Administration are the most popular and are the easiest to qualify for- it’s the program most first-time buyers use and is something most lenders facilitate. FHA loans offer lower down payment options, closing costs and easy credit qualifying.
Similarly, The Department of Housing and Urban Development provides homeowner vouchers to low-income individuals who qualify as first-time buyers. To get this subsidy, applicants must comply with a minimum income requirement, complete a counseling program, and have at least one full-time working adult within the family.
More financial instruments to consider
Developing the habit of asking around is productive and can help ensure you are ready for an opportunity that arises. For example, the Bank of America helped 29,000 buyers afford their property by giving $270 million in grants away through a program they have targeting low and moderate-income persons.
You should also contact homebuilders to ask about programs they offer or know about. Many builders work with preferred lenders and offer builder paid closing costs or help with buying down your interest rates. Similarly, the Department of Agriculture might provide additional assistance if you move to a rural neighborhood through their USDA Loans (USDA Rural Development Loans).
In closing, it is evident that Americans have many financial options available when purchasing a new property. Our nation enjoys some of the most attractive financial instruments with various government programs to assist with the process. Americans have plenty of choice and flexibility when financing their new home, especially when compared to many other countries. With careful planning and consideration, anyone can become a homeowner and invest in financial security.
Quick Tip for Current Homeowners
Are you late on your current mortgage because of COVID-19?
If you are already a homeowner and are having difficulty, you can apply for deferred mortgages. This type of financial instrument moves past-due amounts to the end of your mortgage. It will bring your mortgage current, but the full amount that was placed at the end of your mortgage is due when you sell your home. This is not something we recommend unless you fell behind temporarily on your mortgage, are able to make your regular payment now and have no other options.
