Buying your first home is a momentous time in most people’s lives. Here are some tips for first time home buyers to help you sail through the experience.
Get a GOOD Realtor
I tell this to my clients all the time. You don’t want your friend who just started working as a realtor, or your aunt who does this part-time, to represent you in a purchase negotiation! Especially in a market as competitive as the one we have here in the Bay Area. You want an experienced agent who will work with you to create the most irresistible bid. And you’ll need the strongest financing package and the shortest close possible.
I recommend Kerri Naslund-Monday.
Talk to Your Accountant
One of the biggest barriers to first-time home ownership can be amassing a down payment. Did you know that, even if you are under 55, if you have money in an IRA account, you might be able to withdraw that cash — without penalty — for a down payment on your first home purchase? You may still have to pay taxes on that money, but you might be able to avoid the additional early-withdrawal fee.
Check with your personal CPA for details to find out if you qualify.
The terms pre-approved and pre-qualified are often used interchangeably but there is an important difference. If you are pre-approved, that means that the lender has seen documentation of your income and assets, and has performed a “hard check” to confirm your credit score and viability.
Prequalifying is simply finding out what type of loan and what payments you might be eligible for, which might be useful if you are just starting to look. If you are only pre-qualified, that means that you have reported your income and asset information, but not provided documentation, nor had your credit checked. Therefore, in a purchase negotiation, pre-approval is a stronger position.
See Why Get Pre-Approved for more.
Write a Love Letter
As Kerri will tell you, passion can make the difference in a sale. Once you are looking your best, with a pre-approval letter from C2 Financial, let the seller know why, in your heart, their property is your dream home. If they see themselves in you, they may choose you over another buyer, even if that buyer has an all-cash offer.
Most sellers will list their home 10-15% below market value, or more, in the hopes of receiving multiple bids. Your realtor will help you do your homework, looking at comparable property sales in the area, and considering the market in that neighborhood. You also want to calibrate your bid to what you can afford if the property does not appraise at the price you offer. Will you be able to increase your down payment to make up the difference? If you are considering a high-risk bid, we will look at how that could affect your loan terms. I may advise a loan contingency if needed.
Schedule a Free Consultation with Me
I give away free information — educational mortgage consultations at no cost to you.
I collect your information, I run your credit, and I help you get pre-approved, for free.
Whether the relationship goes anywhere, it doesn’t matter, whether it works out now or in the future. I can help you strategize now for your future plans. I’ve been in this industry for over two decades and counting. I have worked with people on their credit and eligibility for years to get them where they needed to be to purchase the property they wanted to buy. I am happy to work with you for years if needed, until you are ready to buy.
Loan and Down Payment Options for First Time Home Buyers
My firm C2 Financial is approved with over 100 lenders who have a wide variety of products available.
All of our conventional products conform to Fannie Mae Freddie Mac guidelines. We also we have federal housing administration (FHA) loans that allow a down payment of as little as 3-1/2%.
Within our Fannie Freddie products there is a 3% down payment program as well. Both of these programs require private mortgage insurance (PMI) if the down payment is less than 20%. In this case, we also have a way of getting you into a no-PMI product — if we do what is called a “combination loan.”
The rule for PMI is this: when a single mortgage has a loan amount greater than 80% of the purchase price, lenders require PMI. But if the borrower is able to come in with 10% down, we can chop the loan into two pieces. We do an 80% first mortgage and a 10% second mortgage with 10% down. This is called an 80-10-10 — which qualifies as 20% down, so there is no PMI.
Veteran Administration loans are loans that veterans can access for zero down, with surprisingly high loan limits. Contact me for details and to determine if you qualify.
Federal Housing Administration Loans
My firm offers access to many types of FHA financing, of which first-time home purchase is one. For more information about types of FHA Loans, see Mortgage Loan Products.
For more on how you can qualify for a mortgage, start with About Mortgage Loans.