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Joshua Moore
Joshua Moore

What To Do When First Time Buying A House


One of the most important priorities of the Federal Housing Administration (FHA) is helping home buyers with the purchase of their first home, and this includes assisting borrowers with their down payment. If you qualify as a first-time home buyer, you may have access to state programs, tax breaks and an FHA loan.




what to do when first time buying a house



Buying a house can take as little as a few days if you're buying in cash, or can take years if you're counting the amount of time it takes you to save money for a down payment and decide where to live. In a competitive housing market, you may put in multiple offers on homes before one is accepted. Conversely, mounting worry over a housing recession could lead more sellers to pull their homes from the market, making it more difficult to find a suitable property. If you already have your money saved and have a good idea of the neighborhoods and type of home you want, the process will probably take you two to six months. Ask a local real estate agent for a more accurate timeline based on your local market conditions.


Another one of the most important first-time home buyer steps? Seeking pre-approval from a lender for a home loan. This is where you meet with a loan officer, ideally a few at various mortgage companies.


Spending all or most of your savings on the down payment and closing costs is one of the biggest first-time homebuyer mistakes, says Ed Conarchy, a mortgage planner and investment adviser at Cherry Creek Mortgage in Gurnee, Illinois.


How this affects you: Any new loans or credit card accounts on your credit report can jeopardize the closing and final loan approval. Buyers, especially first-timers, often learn this lesson the hard way.


What to do instead: Consider other mortgage options. You can put as little as 3 percent down for a conventional mortgage with PMI, and FHA loans only require 3.5 percent down if your credit score is 580 or above. With some other types of loans, you might even be able to secure a mortgage with no down payment at all. Plus, check with your local or state housing programs to see if you qualify for housing assistance programs designed for first-time buyers.


There are lots of programs out there to help first-time homebuyers. This can range from local government or community programs that offer free classes about home buying and homeownership to grants that give you cash to put toward a down payment.


Here are the basic home-buying steps: Determine how much house you can afford, get preapproved for a mortgage, find an experienced real estate agent, research neighborhoods for best fit, go house hunting, make a competitive offer within your budget, finalize your financing, and prepare for closing.


Remember that the Golden State offers plenty of assistance in the form of home buyer education, special mortgages, and down payment assistance. So eligible first-time buyers could be in line for some real help if they apply.


For California home buyers, a good place to start looking for assistance is the California Housing Finance Agency (CalHFA)4. This agency offers a wide range of first-time home buyer loan programs at its own special interest rates.


The Forgivable Equity Builder Loan is a newer California home buyer program that aims to help first-time homeowners buy property more affordably. Via this program, buyers can get a loan of up to 10% of the purchase price which is forgivable after five years, provided they continue to live in the property full-time during that period.


The City of Los Angeles Housing and Community Investment Department (HCIDLA) has a couple of programs that can help first-time buyers. These include the Low Income Purchase Assistance (LIPA) program and the Mortgage Credit Certificate (MCC).


Via the SDHC, San Diego first-time home buyers might be eligible for down payment or closing cost assistance up to $10,000 or 4% of the home purchase price, whichever is less. The city even offers a deferred-payment assistance loan of up to 22% of the purchase price.


Start saving by slashing expenses and creating a budget to help you reach your goal. You also could ask family members if they can help out. If money is an issue, check out loans with small down payments such as FHA and VA loans to find options that fit your situation. Additionally, some government programs help first-time buyers with down payments (see Tip 7).


A good start for exploring different mortgages is to compare conventional loans to FHA loans. An FHA loan for first-time home buyers, for example, allows lower qualifying credit scores and a lower down payment than conventional loans do. A conventional loan, however, can have fewer restrictions. If you are an active-duty service member or veteran, another option is VA home loans. These have generous benefits and terms.


In general, first-time home buyers are the wrong borrowers for risky loans. If you have a lender who is trying to steer you to one of these products, then you have to ask yourself some hard questions: what price house can I really afford and is this the right lender to help me get there?


As a further incentive to homebuyers, the normal 10% penalty for pre-age 59 withdrawals from traditional IRAs does not apply to first-time home buyers who break into their IRAs to come up with the down payment.


But get this: You don't really have to be a first-time homebuyer to qualify. You're considered a first-timer as long as you haven't owned a home for two years. Sounds great, but there's a serious downside.


If your new home will increase the size of your mortgage interest deduction or make you an itemizer for the first time, you don't have to wait until you file your tax return to see the savings. You can start collecting the savings right away by adjusting your federal income tax withholding at work, which will boost your take-home pay. Get a W-4 form and its instructions from your employer or go to www.irs.gov.


TDHCA works with communities, nonprofits, developers, the federal government and more to create and carry out programs that help people find the right home. It has programs for buyers, as well as renters, and programs for developers that encourage them to build affordable homes. Potential homebuyers must meet certain income and credit standards. Generally, they must be buying their first home to qualify for the Texas first-time homebuyer programs.


MassHousing raised income eligibility for the DPA program in November 2019 for first-time homebuyers purchasing in Boston or buying in one the state's 26 "Gateway Cities." Boston and Gateway City homebuyers can earn up to 135 percent of the area median income (AMI). Homebuyers in the rest of Massachusetts can make up to 100 percent of the AMI. The Commonwealth's Gateway Cities include Attleborough, Barnstable, Brockton, Chelsea Chicopee, Everett, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Leominster, Lowell, Lynn, Malden, Methuen, New Bedford, Peabody, Pittsfield, Quincy, Revere, Salem, Springfield, Taunton, Westfield, and Worcester.


The Home Possible Advantage mortgage only requires a 3 percent down payment and offers a fix-rate, conventional mortgage for first-time homebuyers, as well as other qualified borrowers with limited down payment savings. Homebuyers must meet minimum credit score requirements. The entire 3 percent down payment can come from personal funds, local grant programs, or gift funds.


Understand that making an offer on a home is sometimes the start of a psychological game. You likely want to get the home for as little as you can without losing the house outright. The seller wants to maximize the selling price of the home without scaring you away. Where should you start with your first offer? Conventional wisdom says to begin at 5 percent below the asking price, but market conditions will largely determine how much wiggle room you have. The more competitive the market, the more likely you are to face multiple bidders. In a soft market, where listings have been sitting unsold, you will have more negotiating power. In a rising market, prime listings will command the full asking price or more, and sometimes offering just a few thousand dollars above listing price can help your offer stand out. Either way, keep your budget in mind when you make your first offer and set a cap of how high you are truly willing to go.


An FTHBSA can be opened any time between January 1, 2019 and December 31, 2026. Money deposited in the account must be used to pay qualifying costs of buying a single-family home within 10 years of opening the account.


To qualify, you must be a first-time home buyer and have a household income of no more than 80% of the median income in your area, typically defined as low-income. In Los Angeles County, that means you need a household income of $68,880 or less.


Soaring home prices, turbocharged during the pandemic as people sought out more living space, have made buying a home even more out of reach for many Californians, especially those buying for the first time. The state is looking for new ways to help. 041b061a72


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