8 Easy Steps For First Time Home Buyers

Owning a home has always been an American dream. It does not discriminate against anyone and it is certainly a very realistic and attainable dream. There are pros and cons being a home owner, but the benefits far more outweighs the disadvantages. It is a great way to create wealth, wealth that could be passed on to future generations. It can be a nest egg to pay for your child’s education. It can also be beneficial for us retiring comfortably.

With the downtrend spiral of the market in the Real Estate business, the window of opportunity to achieve the American dream is wide open. Inventory is at the highest, so the law of demand and supply is in the favor of the buyers. Prices have declined significantly, in some areas value of properties had decreased by 50%.

For the first time homebuyer, searching for your new home can be very exciting. That's perfectly natural. Right now housing prices are the lowest they have been in decades. This is the perfect time to buy your dream house!!! Rates on 30-year fixed-rate mortgages are already close to 4.5 percent, a truly incredible figure to be able to lock in for three decades.

Planning properly and discipline will make your dream of owning a home a reality. Low mortgage rates, and an enhanced tax credit for first time homebuyers, should open the door for you and other new homebuyers.

STEP#1 HOW MUCH CAN YOU AFFORD

So what is the first step in fulfilling your dream to own a home? You need to figure out how much can you afford. Calculate your net income less all your expenses, and this should give you an estimate of what you can afford. Keep in mind you need to have a cushion for those unexpected expenses.

Before you start looking into the real estate market and hunting for mortgages, you will need to assess your family’s goals and priorities. Take some time to think and determine if it is the proper time to purchase your first home. If your budget is manageable to come up with the down payment and make your mortgage payments, then you should definitely proceed with the purchase.

Calculate out how much you can afford. How much you can afford depends on your income, credit score, current monthly expenses, down payment and the interest rate on the loan. If you are planning of buying a house with someone else such as your spouse, parent, or children, you can also consider your co-purchaser's annual gross income as well.

Most of the time, first-time home buyers underestimate or miscalculate the costs of becoming a homeowner. Before seeking for your first home, ask yourself if your income is reliable enough to afford your mortgage payments. A rule of thumb is you can afford a house that costs up to two and one half times your annual gross income (that is, the amount you make before taxes are deducted).

A single family with an income nearly $60,000 annually could afford a home that costs $283,400 with a 20 percent down payment. A year ago, a single family with the exact same income and down payment could afford a $263,300 home.

Being a new homeowner, you may not be aware of the expenses of maintaining a home can cost. You should look into the monthly expenses for services such as utilities, and also take into account monthly expenses for groceries, car running maintenance, and other necessary monthly expenses. Also, you will need to pay for the maintenance of the home and any needed repairs.

Houses frequently need something, so when you're calculating your budget, make sure you allow some extra cash for upkeep and maintenance, like roof leaks, broken hot water heaters, and air conditioning or furnace maintenance. Securing a decent reserve fund will allow you to sleep at night without worrying that you've stretched yourself too thin.

Although monthly housing costs may be larger when you own than when you rent, what you save in taxes can make up some or all of the difference. Expect to receive some tax breaks. For details, consult with a tax professional.

After making all the necessary calculations and you feel that you are not confident enough to purchase your first home, it is better to rent now while saving for that down payment than to jump into water over your head.

Also If your credit score is not high enough to qualify for a mortgage, you may want to repair your credit to mid-score above 680 or higher before beginning your property search.

• KNOW YOUR RIGHTS

The second step is; knowing your rights. Educating yourself with your rights as a home buyer could help tremendously. Make sure no one takes advantage of you, this is a life changing decision you truly need to be careful with. Knowledge is power so arm your self with it.

Federal Fair Housing laws make it against the law to discriminate on the basis of race, color, religion, sex, handicap, familial status and national origin.

The acronym RESPA stands for "Real Estate Settlement Procedures Act." This is the law that declares that you should be given certain information when you are purchasing a home. RESPA is a HUD consumer protection statute designed to assist homebuyers to be better shoppers in the home buying process.

Avoid Predatory Lenders, they targets borderline consumers and steers them into sub prime mortgages, even when they could qualify for a better loan. New college graduates, cash-strapped buyers and minorities are often the victims.

Predatory lending is the practice of using unfair, deceptive, and abusive methods in lending money. Unscrupulous lenders in the mortgage and consumer lending industries take advantage of borrowers who are not so knowledgeable about lending practices, getting them to agree to loan terms that are not only less than desirable, but also financially damaging.

Any unfair credit practice that harms the borrower or supports a credit system that promotes inequality and poverty is considered predatory lending. Among the most common predatory practices is placing borrowers into higher interest rate loans than their credit risk would call for.

Predatory lending is a lucrative business, and it is often disguised as legitimate lending by unscrupulous lenders or their agents. Predatory loans turn the dream of homeownership into a nightmare, in the worst case homeowners losing their homes.

STEP #3 SHOP FOR A LOAN

Third step is shopping for a loan; you can save an enormous amount of money by doing your homework. If you have a high credit score use this as leverage. Talk to several lenders, compare cost and interest rates, and negotiate to get a better deal. It would be wise to get pre-approved for a loan. This would give you an advantage when you make your offer on a property.

If you have a great deal of outstanding debt or if you have missed a car loan or credit card payments in the past, it could hurt your chances to get a mortgage. Before beginning your home search, evaluate your current credit situation and your credit history. You can begin estimating this figure by using an affordability or loan calculator found on the Internet.

These calculators are very helpul, they can help compute what may fit comfortably within your budget based on factors such as annual income, annual debts, interest rates and credit score. Research all of your options BEFORE you look at a specific home loan program. The more information you know before your first purchase, the less likely you will find yourself in the wrong type of mortgage loan.

A little bit of research before settling for a home loan can save a lot of money and future problems. If the deal consists of a first time home loan or a first time home buyer, one has to make careful consideration before taking any step.

Having good credit often means buyers can qualify for lower interest rates and higher loan amounts on their mortgage. However, if you have had some credit problems in the past, there are steps that can be taken to improve your situation.

Take some time and become familiar with what you will be required to do, the process, what sellers and lenders are looking for in a prospective buyer, etc. Knowing what to expect will make you much more comfortable and less anxious as you move along the road toward the actual purchase.

Loan standard have tightened substantially since the onset of the sub prime mortgage crisis. A very good credit score is is very important. Your credit score, also known as a "FICO" score is typically translated into a "grade' by a lender. A credit score of 680 and above is preferred.

Having some debt is good to increase your credit score, but be careful because too much debt will lower your credit score. Bad credit and a lot of debt may prevent you from securing a mortgage. On the other hand clean credit and low debt will put you in a position of getting the best possible loan and interest rate.

If you are in a better financial position now than you were in the past, leverage it to negotiate a low interest rate with the loan officer. In your negotiations for a low interest rate, you must be sure that the mortgage lender is not lowering your interest rate, while increasing other loan costs to make up for it.

You may want to get pre-qualified for a loan by a lender so you know how much you can afford, and to show sellers that you are serious about buying. One of he first thing that a lender takes notice of is how you have paid your bills and managed your credit in the past 2 to 5 years.

Pre-qualifying helps to calculate how much of a house payment you can afford; and pre-approval automatically gives you an advantage over other buyers, because you are a valuable prospective customer to lenders.

You should also request the lenders for a pre-approval letter for a loan, which buyers need when submitting an offer. Pre-approval for your loan demonstrates to sellers that you can afford the home and increase your credibility and negotiating strength.

• 30 YEAR FIXED

Loans are made to homeowners by an approved lender and Rural Development guarantees the loan. In case of both the direct and guaranteed program,  qualified applicants may purchase a new home, existing home or build a new home. Traditional loans are 30-year fixed rate.

Some closing costs can be gifted by family members, non-profit organizations or government agencies. Closing costs, legal fees, tax escrow requirements etc., are not included with the mortgage.

Most lenders will also need you to have "reserve money” left in your savings account after you've covered all the costs. Being frugal now will payoff later when you're enjoying your new home..

Credit scores will assist a lender determine what types of loans you will qualify for and the rate of interest you will be charged. Check your credit score and see how you rate!

Lenders will be more than eager to work with so you can secure a better interest rate. Every case is different, talk to your lender to understand all of your mortgage options.

• FHA

The second program available is what's called the FHA loan. Now that loan is probably the most popular loan going right now to purchase a property.

FHA loans are becoming more popular and recent changes in FHA loans have increased the number of people and properties that qualify. The federal government ackowledge that first time home buyers are good for the local and national economy. FHA also allows for a seller to credit of up to 6% so the contract can be structured that the seller is paying for your closing costs.

FHA does not require a minimum credit score. The FHA underwriter will evaluate and make their decision based on the entire credit profile to determine the borrower’s likelihood of repayment.

To see if an FHA loan is right for you, call (800) 251-9080 today! Check out their Low Rate programs for first time homebuyers like, FHA or VA home purchase loans for people with good and bad credit. FHA mortgages do carry additional charges for the FHA's insurance. Currently, borrowers pay an upfront fee of 1.5% of the mortgage amount plus an annual fee of 0.5%.

• GRANTS

Grant programs are not loans. First time home buyer grants are added funds that home buyers can acquire to pay the down payment on their loan or supplement with closing costs. Most states provide educational courses that explain in detail all of the programs (including grants and low-interest loans) available, These courses are free and some are available for a very small nominal fee.

STEP#4 SHOP FOR A HOME

• CHOOSE A REAL ESTATE AGENT

The services of a realtor can be a big help in the entire home buying process. Today's first-time homebuyer is educated and well versed in the home buying process, due in large part to the internet. The leap from renter to homeowner is daunting and most people rely on their agent for professional guidance and expertise.

Choosing a reliable real estate agent is a major decision and one that should not be taken lightly. The more expensive the property and the more detailed the purchase, the more important it will be to hire a knowledgable real estate agent.The real estate agent needs to understand the market and the area which you are particularly looking at in order to guide you to the properties that fit well within your wish list.

Choosing a real estate agent is like choosing a partner in the home buying process. You want that partner to act in your best interests at all times.

Your real estate agent has access to the information on your future dream home. You need to depend on them to find you exactly the types of homes you’re interested in. Ask your agent to inform you immediately whenever a home matching your description appears on the market.

Ask for a resume and some references of past clients before deciding on an agent. Who you choose as your agent can either help or hinder the home buying process. Make an appointment to interview at least three different agents. Commitment, experience and knowledge should be your top criteria’s in making a selection.

You’re REALTOR will guide you through the offer, counteroffer, negotiating and closing processes.

• WISHLIST

You should make a wish list of things you are looking for in a home. For example do you want a fireplace, hardwood floors, stainless steel appliances in the kitchen etc? Make a decision on how many bedrooms and bathrooms you need. Once you've decided on exactly what you need, your home search will be much easier. When making your decision don't forget what your future situation may look like this can help you avoid costly mistakes.

• CHECKLIST

A checklist will help you remember what to evaluate when visiting each home. It will also help you keep all the details i order after viewing many houses, because you'll have everything on paper. Make a list of what you want or need in a home, what you need is more important than what you may want. Prioritize your needs from your want, in case you can't get everything.

• HOMES ON THE MARKET

There is a huge inventory of houses to choose from, once you have figured out what you can afford to purchase inform your real estate agent on the specifics regarding the type of home you wish to buy. Request to view at least 3-4 properties at a time so you can make significant comparisons.

Ask your realtor in advance to give you photos and descriptions from the MLM, multiple listing services so you can preview the homes you are planning to see. Ask for 5-10 properties to preview so you can choose the 3-4 properties that you and your agent will view. Inform him/her of your choices ahead of time so they could make the necessary appointments.

Try to view properties that have furniture’s or are stage, so you could imagine where your existing furniture’s if any will go or fit. Also try to view properties with different price ranges from your budgeted price.

• HUD HOMES

If you buy a HUD home (Housing Urban Development) for example, your deposit generally will range from $500 - $2,000. For those individuals or families that are having difficulties to achieve home ownership, HUD is really the place to visit. They have all the tools necessary to help first time home buyers with their loans and purchase decisions.

Their eight hour, HUD-certified course will qualify buyers for reduced rates with some lenders, as well as down payment loans and counseling. Community Housing Works also offers post-purchase counseling, foreclosure intervention counseling and down payment assistance programs. For aditional information on FHA programs, visit: www.hud.gov/buying/index.cfm .

• FIXER UPPERS

If you are one of those persons that are mechanically inclined, and a master with construction work, a fixer upper may be your choice. It gives you the option of living on the property and fixing it on your own time and when you have the budget for it.

Fixer upper homes give homebuyers incredible diversity, they come in every style and price range. They range from very simple homes to huge extravagant mansions.

Fixer Upper homes often present buyers with some of the best opportunity for the biggest discounts, but this is because they are sold as is, and are often in disrepair. It's important to remember that putting in the work and repairs necessary can often cost a lot of money.

Fixer upper homes at first glance seems like good investments. But before plunging in to buy a fixer upper house, you have to consider the condition. Fixer upper homes generally fall into two categories; those that have mainly cosmetic problems, which is easy to fix and less costly, and those that have systemic or structural problems which could be very costly.

Fixer upper homes always have unexpected problems. These homes are excellent for those on a budget and want a property that is not going to break the bank. Buyers generally buy a fixer upper home at a much lower price making it a good investment.

• MANUFACTURED HOMES

Manufactured homes 15 years and newer should qualify for the 5% down payment program, but in some cases, an older mobile home will qualify for this program as well. For example, a 1982 mobile home that appraises for $100,000, but the sales price is $50,000, should qualify for the 5% down payment because of the equity involved. Manufactured homes come in a different sizes and floor plans that include spacious living rooms, dining rooms, fully-equipped kitchens, bedrooms, family rooms, and utility areas. You can choose a single-section or larger multi section design depending on the size of your your home site.

Manufactured Home Mortgage has the widest range and options of loan products in the industry. Manufactured homes have numerous options and features for a variety of floor plans. You also can choose color and quality options for carpets and wall coverings; and you can also choose other features such as custom cabinets, window designs, and wood-burning fireplaces. Manufactured homes are looking more like residential homes, they are starting to incorporate residential type features like steeper pitch roofs, residential size windows and covered decks.

• BUILD A HOME

Building a home in factory-controlled conditions now generates superior building structures with less overhead, as the innovation originally promised decades ago. Plus, additional methods have improved to increase your design options.

The building plan is designed to be built in either stucco or brick. The dormers on front of the homes are very popular and appealing. Building a new home amounts to a sizable, long-term investment. That's why it's very important to choose quality windows and doors. Building your own home is an exciting, and sometimes exhausting experience. Having a home design the way you want it to look is satisfying.

Building a house often involves sacrifices and compromises. Many home buyers consider building because the they can't find the "perfect" house in the resale market.

STEP#5 MAKE AN OFFER

Making an offer on a house is a big commitment. Before you do anything, make sure whether or not the property is right for you and your needs. When you make an offer on a house in the US, it's like exchanging contracts. An offer on a house in the US is a binding irreversible contract. Make sure you can meet all contingency removals before signing any papers

Your agent will present your offer to the seller's agent for their decision, and they will either accept your offer or issue a counter-offer. You can then accept, or continue negotiating back and forth until you either reach a deal or decide to call it quits.

Making an offer on a house is both exciting and intimidating. You know you wish to buy the home and anxious to discover if the seller will allow you to buy the house.

r's agent, and they will either accept your offer or issue a counter-offer. You can then accept, or continue to go back and forth with the negotiations until you either reach a deal or decide to call it quits.

Making an offer on a house is both exciting and intimidating. You know you wish to buy the home and anxious to discover if the seller will allow you to buy the house.

STEP#6 GET A HOME INSPECTION

Once your offer has been accepted, the next step is to inspect the house. You want to make sure that the property you are buying is not necessarily in perfect condition, but that it is at least livable.

The physical condition of a house is an important part of the home-buying process, a very thorough inspection is mandatory, and should be a condition of closing the sale. You should have one or more professional inspectors look for defects or malfunctions in the building's structure, such as the roof, plumbing, or foundation, and detect pest infestations or dry rot and similar damage.

Your real estate agent can help find a reputable inspector, and will negotiate to get you the most for your money once the inspector's report is final. If there are repairs that need to be done make sure that you negotiate repairs as part of the purchase, ask for a "walk through" before finalizing the home buying paperwork.

If you’re present during an inspection, you can be able to see the problems with your own eyes, get an idea of how serious they are and ask the inspector how much he might think it will cost to repair them.

You ALWAYS need to hire a property inspector to look over the house, even new construction. Inspections on homes for sale is very vital and highly recommended, the small cost for the inspection will save you money and headaches later on down the road.

STEP #7 SHOP FOR HOMEOWNERS INSURANCE

Choosing the right home insurance policy is also a must. You should know that not every home insurance policy covers the usual assets assumed by many to be covered. Some lenders want to be assured that you have the proper coverage and require you to get your insurance through them. It is very important to know these specific requirements so that you would not be late with your application. Ask your insurance agent how much it will cost to insure the property.

STEP #8 SIGN PAPERS

After all terms and conditions have been met on the contract by both the seller and buyer the next step is the signing of papers. This is commonly done at the Title company office or if you are too busy to go to their office they will make accommodations to send a notary public to you to sign the papers.

Closing costs include title and escrow fees, appraisal and credit report fees, lenders fees, agent fees, and any other expenses that may not incur again over the loan maturity period. In most cases, it is the borrower, who pays for the closing costs. Closing costs are normally 2%-3% of the loan amount. Remember that you get the lenders' services only for the non-recurring expenses.

Borrowers will get a rough estimate (Good Faith Estimate) of the closing costs within 3 business days of applying for the mortgage loan. They will also get a list of the actual costs a day before closing.

Armed with the knowledge you need to fell confident in your pursuit of the American dream, go out there and pursue this dream. Don’t waste anymore of your precious time procrastinating. The opportunity for you to realize your dreams is now. Don’t let the window of opportunity close down on you.

Follow these easy steps and you would be on your way of being a proud homeowner. Now is the time to fulfill your long time dreams for you and your family. Secure your future as a homeowner instead of a renter. Truly the responsibilities would be a great deal more, but the rewards in return are tremendous.