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Frequently Asked Questions about Buying Your First Home

September 30, 2022

With mortgage rates recently increasing, millions of Americans are questioning if they have missed their window of opportunity for homeownership. Now is still an affordable time to buy a home. If you’re considering purchasing your first home, take a look at these FAQs. The answers may surprise you.

When should I talk to a lender about a loan?

The simple answer is, as soon as you start thinking about becoming a homeowner. Your loan advisor will go over all your options to see if now is the right time for you to buy and, if it is, get you pre-approved. A mortgage pre-approval is one of the first steps to homeownership. Sellers like to work with buyers who have a pre-approval letter. They know this letter means there’s little risk that the purchase will fall through because of financing issues. The pre-approval letter includes an estimate of the loan amount, the interest rate, and the estimated monthly payment. Homestead Financial Mortgage offers lots of resources to help home buyers get through the purchase process quickly and with as little stress as possible. It all starts with speaking with your lender.

Am I ready to own a house?

Many people contemplating homeownership wonder why they should buy a house instead of renting. When it comes to owning a home, it’s important to think of your home as an investment. When homeowners pay their monthly mortgage payment, they are building equity. There are three significant advantages of purchasing to consider. 1) Payment stability 2) Tax advantages 3) Pride of ownership

Over the years, your home’s value will have appreciated, which benefits you when it comes time to sell. When you rent, the check you write each month is gone forever, and you haven’t built any equity, nor can you deduct mortgage loan interest on your taxes.

Can I afford a home?

Generally speaking, you are eligible for a mortgage if your total monthly debt, including the estimate of your mortgage payment, is less than 43% of your before-tax income. For example, if you make $5,000 a month, your total debt (car loans, credit cards, etc.), including your mortgage payment, should not exceed $2,150. You should consider many factors, including your utility bills, car insurance, groceries, etc. Hence, it’s best to sit down and explore your budget when considering buying a home. A Homestead Financial Mortgage loan advisor can help you determine what payment fits your budget and what that means for the price range of houses you can shop for.

What kind of credit score do I need to get a loan?

Minimum credit scores vary by lender, the type of loan, and the state in which you’re purchasing. In general, the higher your score, the better the rate you will receive. Many first-time homebuyers with bad credit and minimal resources for a down payment are often afraid to ask if homeownership is even a possibility. Speaking with a Homestead loan advisor at the very beginning of your journey can help you sort through your options and guide you through any challenges you may need to overcome.

How much money do I need to buy a home?

Down payments range anywhere from 0% to 3.5% for first-time buyers depending on the loan type and the loan amount. Many options available do not require buyers to save a 20% down payment. Your Homestead Financial Mortgage loan advisor can walk you through all the options, so you know how much you will need to save.

Should I use a real estate agent?

First-time buyers often ask if they should use a real estate agent when starting the home-buying process. The answer is yes. There are so many financial particulars involved with buying a home, and a good real estate professional can make things much more accessible by guiding you through the process. An experienced real estate agent who is well-acquainted with the area you are interested in can provide information about the school district, the neighborhood’s safety, the number of children in the area, traffic volume, etc. They can narrow your home search by keying in your preferences to the MLS (Multiple Listing Services) and get immediate access to available homes that match your criteria. When you’re ready to make an offer on a home, an agent will lead you through the contract paperwork step by step and answer your questions.

To learn more about what the first-time home buying process will entail, from preapproval to closing day, read more about that here in the Home Buying Process Explained.

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