If you are a first time homebuyer you likely have numerous questions. The answers below to common questions of a first time homebuyer should help.
How much money do I need to have to buy a home?
When purchasing a home you will be responsible for paying a down payment and closing costs. The closing costs are the amount of money required to process the paperwork to create the mortgage. Once you submit your loan application, the law requires the lender provide you a Good Faith Estimate (GFE) within 3 days. The GFE will give you a close approximation of what the closing costs will be.
The down payment is the percentage of the home cost that you are going to pay for the house out of pocket at closing. It will obviously depend on the price of the home you are purchasing. Traditionally a 20% down payment is suggested but that is often too much money for a first time homebuyer. The Federal Housing Administration (FHA) offers loan options that require a lower down payment amount (as low as 3.5%) so this may be a good option for you.
What is a ‘term’ of the loan and which ‘term’ should I choose?
The ‘term’ of a loan is the length of time you will be paying the loan. Options are typically 15 years, 20 years and 30 years. At the end of the ‘term’ you will own the house completely and will no longer need to pay mortgage payments. Although a shorter loan may seem ideal keep in mind that the monthly payments will be significantly higher. A longer loan will mean you will pay more interest over the life of the loan however. If you itemize your taxes you can deduct the mortgage interest.
When deciding which term is right for you consider if you can afford the monthly payments now and in the future. For example, if you plan to have kids in the future you may want to choose a longer term, lower monthly payment loan, because you will likely have childcare expenses in addition to your mortgage.
Can I buy a home if I have bad credit?
Even if your credit isn’t perfect you may be able to buy a home. At 1st Alliance Lending we look at more than just your computer generated credit score. We believe in evaluating the entire situation and want to know your personal story.
What if I have more questions?
If you have additional questions don’t hesitate to contact us at 1st Alliance Lending. We frequently work with first time homebuyers and are happy to answer all of your questions. We will assign you one loan officer and provide you the loan officer’s direct extension and email so you can ask any questions you have. We would be happy to help you buy your first home!