First-time Homebuyer Tips: What You Should Know About Financing

February 27, 2019

Buying your first home is exciting, particularly when you’re fully prepared for the journey. When you’ve never traveled the path to homeownership, you should learn the route. McGuinn Hybrid Homes has these first-time homebuyer tips to cover what you should know about financing, the key to achieving your dream! 1. Talk to a lender first. Before you click on a listing or contact a Realtor, talk to a mortgage professional. This vital step will help you understand what you are likely to be approved for, and the mortgage pre-approval works in your favor when you’re making an offer; the seller has proof that you’re a qualified buyer, which is a competitive edge against those who missed this step. 2. Learn the facts about down payments. You might have accepted the misinformation that you need 20% of the purchase price to put a down payment on a home. Not true! The average down payment on a home these days is about 10%. With mortgage programs like USDA, Veterans Affairs, and FHA home loans, you might be able to finance as much as 100% of the purchase price, including closing costs. The USDA home loan and VA home loan allow for zero down payment for qualified buyers and homes. The FHA mortgage program requires only 3.5% down when your credit score is 580 or above. If your FICO score is between 500 and 579, you could still qualify but will the program will require a 10% down payment. Even a conventional home loan can require as little as 3% down (known as the conventional 97% loan-to-value program). If you put less than 20% down payment on a home, you could be required by the lender to purchase private mortgage insurance (PMI). This cost is about 0.3% to 1.5% of the loan amount per year, and determined by your credit history. The PMI is included in your monthly mortgage payment. Once you’ve reached the point where the balance of your loan is equal to 80% of the home’s assessed value, you can cancel the PMI. 3. Estimate what you can afford. Just like you should know how much of a mortgage you qualify for, you need to know how the purchase price impacts your monthly payment. Expenses like homeowner’s insurance, property tax, PMI, and HOA fee will be incorporated into your mortgage. Those fees are paid directly from your escrow account so you don’t need to worry about them. Use this Zillow mortgage calculator to see how the purchase price and associated fees leads you to a payment you can afford. 4. Research mortgage lenders. Not every lender has the expertise to handle your mortgage needs. It pays to shop around. Some are more familiar with programs like USDA, FHA, and FHA. If that’s the direction you’re heading, ask your prospective mortgage company about their experience with these programs. Find out about the interest rates and fees they charge, too, because those usually vary from one company to the next. McGuinn Hybrid Homes works with Southern First because they’ve proven their expertise in guiding our homebuyers through financing a new home. Whether someone is buying a move-in ready home or building with us, Southern First’s Carter Weston knows the process and makes sure every step is handled in a timely way. When your new home search steers you to the Columbia, SC, area, we invite you to talk to us. Browse our communities of townhomes and single-family homes. Or let’s discuss how we can build one of our energy-efficient homes on your own land!