Buying a Home & Homebuyer Resources

Residents often wonder about how to buy a home. The process of purchasing a home involves completing numerous steps.

The first important step is create a financial plan and save enough money to afford the down payment. In addition, aspiring homeowners must ensure that their credit score and any existing loans and credit cards are in good standing.

How to Buy a Home

After confirming that their finances are suited to the home buying process, residents can begin their search for an appropriate lender and request pre-approvals. For first-time home buyers, this process can feel overwhelming and complicated.

For this reason, we have consolidated all of the important steps and information involved in purchasing a home in the guidelines below.

Rent or Buy a Home

Buying a home with no money down may be possible for those with good credit. Applicants who are approved for zero down payment may be approved for additional discounts. For instance, they can receive a cash reward at closing. However, residents with lower credits scores may be charged higher down payment and only be offered high interest.

It is essential to reduce your debt and improve your credit score if you want to qualify for a mortgage with no money down.

First Time Homebuyer Federal Grants

There are first time home buyer federal grants available for borrowers who do not have good credit. Housing and Urban Development loans, or HUD loans allow residents to purchase loans that are insured by the Federal Housing Administration (FHA). Lenders are much more likely to accept applications from a borrowers who have backing from the FHA.

However, these loans must be supplied by an FHA-approved lender. Moreover, veterans may qualify for a VA home loan. This type of loan is partially insured by Veterans Affairs (VA) and can be purchased through a private lender.

Borrowers seeking a home loan through HUD must be eligible for approximately 96.5 percent financing. Furthermore, applicants must pay for a certain amount of the mortgage insurance premium in order to obtain this type of loan. Furthermore, the FHA requires residents to have credit scores of at least 580.

Credit Score to Buy a Home

It can be valuable to check your credit score prior to applying for a home loan. Applicants with low credit scores may not qualify for a mortgage, or they may qualify but only with a high interest rate.

Prospective homeowners can check their credit scores on the Federal Trade Commission’s official website. Every 12 months, residents can obtain a free credit report from the three major credit reporting companies: Equifax, Experian and Transunion.

However, other credit reporting websites allow residents to access their reports more frequently. Although, home buyers may be required to pay additional fees for their report or only be able to obtain a report from one credit reporting company rather than all three.

There is a certain credit score needed for a home loan.

However, it depends on the lending institution and an applicant’s financial situation. For instance, standard private lenders often require borrowers to have credit scores that are in the very good to excellent range. Applicants with lower credit scores may still qualify, but will be required to pay a higher interest rate and pay more on their down payment.

Moreover, lenders may check applicants FICO score in addition to their credit report. This is because the FICO score helps lending institutions to determine residents’ credit risk.
Residents who have obtained a free credit score check and found that their scores are low can take steps to improve them.

Important steps in this process include paying bills on time and paying off credit card debts. If a creditor denies a resident’s loan application, he or she is required to send a notice explaining the decision. Applicants who not receive a notice are entitled to ask for one within 60 days of the denial.

Mortgage Loan

Home mortgage loans enable residents to purchase a home or property without paying for the entire cost upfront.

These loans make home buying easier as houses are some of the largest purchases that Americans make during their lifetimes. Mortgages typically have lower interest rates than standard loans although they have a longer paying period, such as 30 years.

Buyers are able to obtain either a fixed or adjustable interest rate for their mortgage. Fixed rates allow home buyers to plan for the cost of their home while adjustable rates are smaller in the beginning of the loan.

Mortgage loans require an initial down payment. It is typically 10 percent of the total cost of the home. The rest is paid in monthly installments.

However, borrowers with high credit scores are sometimes permitted to pay as low as zero to three percent of the total cost.

Mortgage loan rates are dependent on applicants’ credit scores. Lower scores indicate to lenders than an applicant is less likely to make payments on time. Thus, it is beneficial for residents to improve their credit as it can help them save money in the long term.

However, mortgage loan applicants must consider other costs associated with purchasing a home. These costs include collateral, homeowner’s insurance and taxes.

Home Loans

Acquiring home loan preapproval can help residents determine the types of loans and interest rates that they are eligible for.

Pre-approvals are formal letters sent by lending companies that inform prospective home buyers of their qualification for a home loan. These letters often do not include many details about available loans, they do provide useful information for residents who are considering purchasing a home.

Requesting a pre-approval from multiple lenders can help interested borrows make a better informed decision. Residents are advised to request pre-approvals from at least three different lenders.

Choosing A Place to Live

While wanting to live in a big fancy mansion might sound like a dream, the costs and efforts needed to maintain such a large home might prove to be too much for your time and budget. On the other end of the spectrum, squeezing a large family into a studio apartment is impractical.

There are pros and cons to each type of housing situation should be weighed against the most important needs you have in a home. Choosing a place to live means considering daily activities and needs, such as commuting options, schools and other community amenities like grocery stores and shops.

While all of these considerations are important to factor into your decision of where to live, the most basic factor could be the type of place that you need. For example, there are condominiums (typically just called condos) and apartments, including studio apartments, that might appeal to you. Perhaps a manufactured or mobile home suits your needs better. However, do you know the difference between those two styles?

On top of all these options for places to live, there is the idea of buying a home instead of renting. If you are thinking about purchasing your first home, you must consider many factors first. Not least of which is the initial financial investment plus the regular costs of homeownership.

You will also need to consider monthly, annual and occasional costs when evaluating your financial options, whether you are renting or buying. Of course, you want to find a place to live where you can feel at home and happy!

Don’t let the idea of trying to research the many housing options available overwhelm you; get all the details you need in one place so you can better understand all the opportunities.

Find out all about these different housing options with plenty of detailed insights as we dive deep into answering that big question: “Where should I live?”

Condos vs. Apartments

Condominiums and apartments both offer pros and cons when looking at rental options. If you are trying to decide where to live, first understand the differences between condos and apartments. While they seem very similar at first glance, both tenants and owners need to understand the differences so there is not any confusion about costs or responsibilities.

Condos and apartments are typically both units within larger buildings of units. Both might offer building amenities like a pool, on-site gym or common areas for residents to use within the building or outside the building.

However, the monthly costs associated with condos differs from apartments, which could be passed onto a renter if the owner chooses to do so. There are also rules and regulations associated with living in a condo that you might not be familiar with if you have never lived in one before.

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