The 5 Most Important First Time Buyers Tips & Facts

Having access to first time buyer programs is not necessarily an advantage, although it does give you additional options that non-first time buyers do not have.  If you are looking to buy your first house, the first thing you need to understand is whether the first time buyer programs are the right loan program for you.  Once you understand that, you can start communicating to your lender the right facts so they can start to make a loan specific to your needs.

1 – Define First Time Buyer:  Know the Definition

When you think of a first time home buyer, you think of someone that has never owned a home in their life.  Contrary to that natural belief, the mortgage industry defines a first time buyer as someone who has not owned a home in the last 3 years.  What if a husband and wife are buying a home together and the wife owned a home previous to their marriage, but the husband has not?  As long as one buyer/borrower has not owned a home in the last 3 years, you can consider using a first time buyer program.

2 – Understand Down Payment vs Cash to Close:  Use the Right Terminology

It is important you learn some minimum mortgage terminology so that you and your mortgage professional are always talking about the same thing.  Down payment is simply the amount of money you bring to closing that goes directly to the price of the home.  For example, if you are buying a $100,000 priced home and bringing 3% down payment, you are bringing $3,000 as down payment.  Cash to close is your down payment plus any other costs or transactions fees you bring to closing.  Assuming the seller of the home you are buying is not paying any of your closing costs, closing costs can range from $4,500 to $20,000 depending on the price of the home and the structure of your financing.  Contact me for a better understanding.

3 – Best Overall First Time Buyer Perk:  Fact vs Fiction

Many people think that FHA is a first time buyer loan program but it is not.  Many people think that FHA allows for a lower down payment than Conventional loans, but that too is not necessarily the truth.  If you are considered a first time buyer and looking for the lowest downpayment possible, conventional offers a 3% down payment option for first time buyers.  Anyone can use an FHA mortgage to buy a home, but you can not have 2 active FHA mortgages at the same time, like you can with conventional.

4 – Down Payment Assistance for First Time Buyers

Did you know that you do not have to be a first time buyer to get down payment assistance?  There are more down payment assistance loan options for first time buyers than there are for non-first time buyers though.  Down payment assistance can be used toward closing costs and minimum down payment requirements for the loan you are using.  There are many buyers that use down payment assistance that end up using little to know money out of pocket to buy a home.  Since VA, and USDA home loans allow for zero down payment, it is more likely to buy a home with little to no money out of pocket using a down payment assistance program vs FHA or Conventional.

5 – Down Payment Assistance Is NOT the Best Option

In most cases, down payment assistance programs come with higher interest rates.  If I have said it once, I have said it a thousand times to clients in the last 20 years, if you have the money to bring your own down payment and cash to closing, it makes more financial sense to not use down payment assistance.  The lowest interest rates are usually tied to non-down payment assistance programs.  My explanation for that is that these programs are designed for people that would not be able to buy a home without the help of assistance.  Therefore, down payment assistance has an awesome reputation for “making homeownership possible”.  I have put many families in homes using my favorite down payment assistance programs and believe in them wholeheartedly. 

Contact me today to learn if you can qualify for a mortgage using down payment assistance! Or, click the “Get Preapproved Now” in the top right of this page.

Getting Preapproved is the next step, Understanding the Nuances:  Mortgage Prequalification vs. Mortgage Preapproval is also important.  One other tool to arm yourself with is knowing how to win in multiple offer situations…this is a quick read to help.