People who buy a home for the first time face several challenges when they are looking for a new house. They may not have an established credit history or they may not have enough money to make the down payment that would qualify them to receive a traditional mortgage loan or the debt-to-income ratio may be too high to qualify for a traditional mortgage loan.
What many first home buyers do not know is that there are alternatives to traditional mortgage loans. Government grants first time home buyer programs and even some financing options have helped millions of avid buyers to become homeowners for the first time.
Here is a discussion at a few of the biggest programs and how you can take advantage of them.
Government Supported Mortgage Loan Programs
Federal Housing Administration
The Department of Housing and Urban Development oversees several programs that help people become homeowners. The largest program is the Federal Housing Administration loan program. This program works just like a traditional home loan or home loan program. You should still obtain the mortgage loan from a bank or credit institution of your choice. However, you will still need to make a down payment, even if it is less than 20% usually required by traditional mortgage loans. The difference is that the loan is backed, or guaranteed, by the federal government. This means that if you fail to pay the loan, the government is responsible for it.
There are two options in the program:
The first is similar to the FHA program except that the loans are guaranteed by the USDA
The second program offers low-interest and fixed-rate real estate loans through the USDA Rural Development Program for low-income buyers.
None of these options require a down payment and payments are fixed but certain requirements regarding income and geographic location have to be met.
Get ready
Find the ideal house. Create a list of everything you would like to have in your home. Be open to the possibility that your first home does not have everything you dreamed of. Consider hiring a realtor (“realtor”), who will help you determine how much to offer for the house based on comparative listings of homes sold in the area. The agent will also tell you how to make a purchase offer.
Prepare your finances. If you have already decided that buying is better than renting, organize your finances. Determine how much money you have for the purchase based on your income and savings. Don’t forget to consider the money for the down payment and the monthly fees that you will have to pay. Start preparing with these steps.
Submit an offer
Once your finances are ready and you have chosen a house, submit an offer. Include a “escape” clause or condition that states that the offer may change after the home inspection. You can hire the services of an inspector to evaluate the condition of the house as the conditions of the structure, construction and mechanical systems. It will also tell you if repairs or changes are needed.
If the professional inspector detects serious problems in the house and you included the “escape” clause, you can decide not to buy the house or renegotiate the price. This is the negotiation between buyers and sellers to reach the sales price they want. In some cases, the seller can repair the problems of the house before the sale or the price can be reduced.
Get a loan
The mortgage is the money you are going to borrow from the lender. Before making any decision, find out about the types of mortgage loans.
Seek help from experts
You are not alone in this whole process. You can contact an expert to receive advice at any time