10 Great Tips For Buying Your First Home

Without a doubt, buying your first home represents a major investment. It's likely you'll never make a purchase greater than this in your lifetime. However, it does not have to be a scary thing for you. Many first time home buyers wonder how to go about this, so please read on to find out the top 10 tips for buying your first home.

With the right amount of accurate knowledge you can make this purchase and feel good about doing it. In this article, I'll help you get started and walk you through it step by step.

TIP #1: GET YOUR EDUCATION FIRST

Before you even start looking at homes, learn what you can about the mortgage process itself. Since this is the single biggest debt most of us take on, don't you think it's important to understand how the mortgage works? What kind of mortgage is for you, how much and so on?

Spend time researching first time home buyer loans, discover for yourself what options you have and ask questions. Use the internet to begin this process.

Once you have a good feeling that you understand how a mortgage works, then begin to look for a large national bank. I do not suggest mortgage brokers. National Lenders are highly regulated and approved by the Federal Government for guaranteed FHA home loans.

I like Wells Fargo, Bank of America, J.P. Morgan Chase and Flagstar Bank. You should be able to find one of these lenders in your city and state.

TIP #2: BECOME PRE-QUALIFIED FOR AN FHA LOAN

Once you understand the mortgage process, what type of loan is best for you then you want to become pre-qualified. I strongly suggest the FHA home loan for first time home buyers. It has a low down payment, good interest rates and the US Government will guarantee the bank by insuring the loan.

Make sure the loan officer you're working with has experience with FHA loans. Many do not and they try to steer you towards another loan product because it's easier for them.

During this pre-qualification process you will discover how much home you can afford and what your credit standing is.

TIP #3 CONSIDERING YOUR LOAN OPTIONS

Ok, once you know how much you can afford, we must decide on a fixed mortgage or an adjustable. FHA does offer both. The adjustable has a lower payment, but in the near future like 3-5 years your payment will be going up.

Choose the 30 year fixed rate mortgage since your payment will not change for 30 years with the exception of taxes and insurance when they go up.

Furthermore, the FHA mortgage allows for a low down payment, like 3%. Yes it does have mortgage insurance, but that's what makes it possible for your lender to allow you to put down such a low down payment. Otherwise you could find yourself looking at down payments of 10%-20% or more depending on your credit.

#4: GET YOUR CREDIT IN ORDER

Ok, this is where many first time home buyers hit their first obstacle. Some have no credit at all or they may have less than perfect credit.

Let's talk about the no credit situation first. If this is the case with you, then begin by thinking a little outside the box. Do you buy car insurance? How about a cell phone? Are you renting? Paying any utilities?

These can help you establish credit. Even though they may not be reporting on your credit profile, a good mortgage loan officer while doing an FHA loan can help get these trade lines considered for credit with the underwriter.

If you have blemished credit, well this is a different story. It may take some time to get it corrected, but it's worth the effort. You cannot go through life without credit, so get started now if this is the case with you.

TIP #5 APPLY FOR THE MORTGAGE

So then, you now have your credit in order, you already know you want an FHA loan and you have been pre-qualified for a certain amount, it's time to apply.

You must realize that when applying for the loan, once approved it will only be good for a certain period of time. In most cases it's 90-120 days, although it could be more or less.

This process requires you get together some paper work. Normally it will be the last 2 years of tax returns, the last 2 years of W-2 statements, your last 4 check stubs and the most recent 3 months of bank statements. This is a minimal amount, likely you will have to produce much more. Just get ready to give them everything they ask for, including blood, urine samples and your firstborn (just kidding).

By taking this important step, you will then have some leverage when buying your first home. Having a pre-approval letter in your hand is like having cash in your hand. You can negotiate a lower price because the seller does not have to wait for you to get approved.

Besides this, many realtors will not work with buyers who have not taken this step yet.

TIP #6 SHOP FOR A GOOD REALTOR

This step is just as important as finding a good loan officer. A good realtor will know how the FHA mortgage works. You loan officer may even know someone and has a few different realtors he/she is used to working with. Just ask.

The realtor should be able to give you a few suggestions of homes available in your price range. You should look at these suggestions carefully. I recommend that you first do a drive by. If you don't like the curb appeal don't waste your time or the realtors.

By asking the realtor about previous sales in the area for comparable homes this can help you determine the offering price. A good rule of thumb is to get the price per square foot for these homes sold over the last 6-12 months. Then compare this to the home you want to buy. This will help you know how the market has been performing.

Becoming armed with this information will help you when writing that first offer. Don't become disappointed if it's not accepted. You can always go up if you really want the home or move on to the next one.

TIP #7 MAKE SURE YOUR LENDER IS GIVING YOU THE BEST RATE

So now, you found the house you want to buy, perhaps you even made an offer and it's been accepted.

Why not take the extra effort to check the interest rate you've been quoted? Talk to a few other national banks, ask for their current rates for an FHA home loan. Do not allow them to pull a credit report since this could cost you some points.

If by chance you find a better interest rate, tell this to your first lender. Allow them to think you're considering applying with them. Perhaps they will lower the rate.

If they offer you an interest rate you like, ask them how much it is to lock the rate in for 90 days. Then ask them how much for a 30 day rate lock. Most of the time a 30 day rate lock will be a better.

Then proceed with the purchase of the home. Hopefully you will take less than 30 days to close since you have met all the loan conditions before hand.

TIP#8 WATCH OUT FOR HIGH CLOSING COSTS

At the beginning of the loan application you should have received by Federal Law an estimate of your closing costs.

Now that you have selected a home, you need a new estimate. Ask your loan officer for this. Compare it to your first one. Make sure all the costs line up with what you expected.

It should be within a few hundred dollars of the first one. Keep in mind it does depend most of the time on the price of the house. If your first estimate is based on the maximum loan amount, your closing costs estimate should only get better, not worse.

TIP #9 GET THAT HOME INSPECTION

Now FHA requires an approved appraiser to inspect the home. They will look for major safety and health violations. They also consider the mechanical systems, roof, foundation and sidewalks to make sure everything is in good repair and working order.

However, they do not perform a home inspection for you. It's for the bank and you may not even see a copy of it.

So consider getting your own home inspection. The few hundred dollars you spend may save you thousands of dollars down the road. You will get a copy of this inspection since you paid for it.

If there are several items that require attention, yet your FHA lender has approved their own inspection, you could use this to bargain on a lower sales price.

Although you do not have to get one of these inspections, it might be a good idea so you know what you're buying. Oftentimes home inspections are very detailed and reveal any serious problems with a home.

TIP #10 KEEP A GOOD RECORD

Now that you're a educated home shopper, you can rest at ease. You know what to look for. You understand the FHA mortgage process. You may have even one or two houses you want to buy.

Since it's very possible you may be looking at several homes, take pictures inside and out. Take plenty of and notes. List the features you like and don't like. Write down the prices. This will help you later.

Going over these pictures and notes will help you when buying your first home. Keep in mind this is a lifestyle change and you want to make the right decision the first time. It's not like an item you buy at the store where you can return it.

Last and certainly not least, you must be able to see yourself living in this home for many years to come. Visualize your furniture in the house. Move in with your mind first.

If you follow these 10 great tips for buying your first home it should be a pleasant experience for you and your mate.

Jeff and Melinda Ragan want to help you get into your first home by offering a free buyers guide and other helpful information on their website, First-Time-Home-Buyer-Solutions.com