A Comprehensive Financial Guide for First-Time Homebuyers
As a first-time homebuyer, the homebuying journey can be exciting and also intimidating. Our team consists of New Home Specialists and knowledgeable Lender Partners who are here to guide you through the process and help answer all your questions. Curious about where to even begin your homebuying journey? Read on to find answers from our Lender Partners on some of the top questions we've heard from our first-time homebuyers.
How Do I Figure Out My Budget?
Determining your budget is the crucial first step in the homebuying process. This will help you determine your buying power and empower you to make smart decisions for your future. Our Lender Partner, Phil McKenney of CMG Home Loans said it best: "Everyone's budget is different. Calculate your net monthly income, considering taxes and deductions. Detail all your monthly expenses, including housing, utilities, insurance, debts and groceries. Consider your long-term financial goals, emergency funds and savings. Lastly, utilize online budgeting tools to track and analyze your financial situation." Now that you've finished your budget, you can move forward in the process!
What Can I Afford?
Understanding what you can afford involves more than just your monthly mortgage payment. Consider your lifestyle, future plans and other financial goals. We encourage potential homebuyers to prioritize long-term financial stability over stretching their budget for a larger home. Can you save money each month with your current housing payment, and can you continue saving if your monthly housing payment changes? Meeting with a financial advisor or loan officer is a wise step to fully understand what you can afford before you begin home shopping.
How Do I Know That I'm Ready to Buy a Home?
Assess your personal and financial readiness for homeownership. Consider factors such as job stability, future plans, and overall financial health. HHHunt advises potential homebuyers to take the time to evaluate their readiness and make informed decisions. Sonya Orlick with Caliber Home Loans gave some helpful questions when deciding if you're ready to buy a home. Check them out below!
- Is your rent rising?
- Is your credit score good?
- Is debt manageable?
- Can you afford a down payment if needed?
- Do you have funds set aside for maintenance?
- Is your lifestyle stable?
- Do you have an idea of what you want?
- If you answered yes to what's above, get pre-approved!
How Much Should I Put Down?
The down payment on a home can be a significant upfront cost. The traditional 20% may not be feasible for everyone, particularly on your first home purchase. The good news is that there are various down payment options available, many with lower requirements and even grant funds available to help make home purchases affordable for first-time buyers. Speaking with a loan officer can help you understand what your options are and which is the best fit for you.
What Do I Need to Know About Closing Costs?
Closing costs can catch first-time homebuyers off guard and are typically 3% to 6% of the home's purchase price. Mark Wooten with First Home Mortgage advised us, "You can often use your preferred lender credits to offset personal and third-party costs associated with purchasing a home." Be sure to familiarize yourself with typical closing costs such as appraisal fees, title insurance and legal fees.
What Are My Financing Options?
There are many options for financing, and your situation is unique. Our team of experts can guide you through exploring the various options available, including conventional loans, FHA loans and other programs designed to make homeownership accessible. We can help you compare interest rates, terms and eligibility criteria to ensure you find the financing solution that best suits your needs.
Is My Credit Good Enough to Buy a Home?
Your credit score plays a significant role in securing favorable mortgage terms. Check your credit report, address any issues, and work towards improving your score if needed. We recommend consulting a mortgage professional to understand how your credit score impacts your homebuying journey. They can help determine what you qualify for and what you're comfortable with paying each month.
Can I Buy a Home with No Money Down?
There are programs that allow homebuyers to purchase a home with little to no money down. These options have very specific criteria, so we advise exploring options such as VA loans, USDA loans, and down payment assistance programs with a mortgage professional to find a solution that fits your financial situation.
Should I Get a 15-Year or a 30-Year Mortgage?
Choosing between a 15-year and a 30-year mortgage depends on your financial goals and priorities. Consider factors such as monthly payments, interest rates and long-term financial plans to determine the mortgage term that aligns with your objectives. A 15-year mortgage will require your monthly payments to be higher, but in turn, you will pay less interest due to the term being shorter. A 30-year mortgage may be the more affordable monthly option, but you will pay more interest over time. Review your budget and overall financial situation to ensure you make the best decision.
What Is the Difference Between a Mortgage Pre-Approval and a Mortgage Pre-Qualification?
Understanding the distinction between pre-approval and pre-qualification is essential. Pre-qualification estimates what you can afford, while pre-approval involves a thorough financial background check. Tina Konidaris with The Athena Group of NFM Lending explained it: "When we pre-approve someone, we review their income and assets in addition to looking at credit. A pre-qualification requires that we still view credit, but we are going off of what the buyer says for income/assets rather than actually looking at things like pay stubs and bank statements." You can stop in at any of our HHHunt Homes community sales centers for a no-commitment pre-qualification from our on-site staff and Lender Partners.
Why Should I Buy?
Owning a home offers numerous benefits, and it's important to weigh the advantages of homeownership against renting to make a decision that aligns with your lifestyle and long-term goals. Greg Donohue with Truist offered several reasons owning a home is a smart decision. Check them out below!
- A home is a source of security and comfort
- It's a great investment that you can count on to appreciate over time
- You increase your equity with each housing payment
- Your property taxes and mortgage interest are tax-deductible
- Owning a home may result in paying less taxes if you had a similar rent payment
When Is a Good Time to Buy a Home?
We've seen an interesting last few years in the housing market. From the historically-low interest rates during the pandemic to the rising prices and mortgage rates in 2023, you may feel weary about becoming a first-time homebuyer. Homeownership is still the best way to build long-term wealth in the United States. Homebuyers should not fear buying at the "top of the market" as long as prices increase. Rent prices continue to climb, so purchasing a home may be the right move to pave the way for your financial future. Amy Magorian Howell with TowneBank Mortgage gave insight by saying: "Timing is a multifaceted decision involving personal goals, market conditions, and potential economic changes. Through detailed discussions, you, your agent and loan officer can analyze your unique circumstances and market trends to pinpoint the optimal time for your home purchase."
Are you ready to embark on your journey to homeownership? We know this process involves careful consideration and financial planning, and that's why our experts are here to guide you every step of the way. At HHHunt, we offer home choices designed for how you live – whether that's a townhome, condo or single-family home. We invite you to explore our new home communities in North Carolina and Virginia.
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