First Time Home Buyers

First Time Home Buyers

Gustan Cho Associates

Many renters do not realize that they can qualify to be homeowners.  Many renters think that they need 20% down payment in order to be first time home buyers and great credit as well as reserves.  That is not the case.  As long as you have documented income and are able to afford your housing payment, you will most likely qualify for a mortgage loan.  FHA loans only require 3.5% down payment on a home purchase as long as your minimum credit scores are at 580 FICO.  If you have very low credit scores, you can still qualify for a mortgage loan as long as you have compensating factors.  You can qualify for a residential FHA insured mortgage loan with credit scores between 500 FICO and 579 FICO with a 10% down payment as long as you have compensating factors.  Compensating factors are strengths that you can provide the mortgage lender like larger down payments, assets, rental verification, strong job history, other documented income that cannot be used to qualify as income in your mortgage loan application such as bonus income, part time income, overtime income, and other income.  VA Loans and USDA Loans do not require any down payment.  Closing costs?  Don’t worry about closing costs.  There are always closing costs with a home purchase which covers title charges, attorney charges, transfer stamps, escrows, and other costs associated with the purchase of the home.  FHA allows up to 6% of sellers concession towards a buyer’s closing costs.  VA Loans allows up to 4% of sellers concessions towards a home buyer’s closing costs.  Conventional loans, Fannie Mae and/or Freddie Mac, allows up to 3% of sellers concessions towards a buyer’s closing costs.  Investment home mortgage loans allows up to 2% of sellers concessions towards a home buyer’s closing costs.  A sellers concession is when a home seller will give a home buyer a certain amount of money to help the home buyer with their closing costs.  Nothing is for free so why would a home seller give away free money to help the home buyer’s closing costs?  It is all negotiation.  If a home seller want a bottom line of $150,000, the home seller and home buyer can agree to inflate the purchase price to $155,000 where the home seller will give the home buyer a $5,000 sellers concession towards the home buyer’s closing costs.  There cannot be an overage in closing costs.  If a home buyer does not use up 100% of the closing cost credits, then the excess seller’s concession goes back to the home seller.  If the sellers concession does not cover 100% of the closing costs, the mortgage lender can give the home buyer a lender’s credit towards the home buyer’s closing costs for a slightly higher interest rate.  If the home buyer cannot get a seller’s concession towards a home buyer’s closing costs, then the mortgage lender can possibly cover all or most of the home buyer’s closing costs.

How Do First Time Home Buyers Go About Searching For Homes

First time home buyers can begin their home searches right away prior to hiring a realtor.   Prior or during the home search mission, you should consult with a mortgage lender to see whether you qualify for a mortgage and what is the maximum mortgage loan amount you qualify for.  Your mortgage lender will then issue you a solid pre-approval.  A pre-approval letter is your ticket to view the homes that you are interested in.   This way, you will know what price range of homes that you should shop for.

The majority of home searches start with going online.  Go to Google and enter homes for sale in the particular area you are interested in and enter your criteria and you will get hundreds of results.  You can eliminate many homes that do not interest you by viewing the virtual tours and the photos each home has.  Once you have viewed the many homes that might interest you, you can then consult with a realtor to start visiting the homes that interest you.

How Long Does It Normally Take To Purchase A Home?

This is a tough question to answer and depends on the particular individual.  The more prior due diligence first time home buyers do, the quicker they will find a home and have it under contract.  There are times where first time home buyers will gravitate towards the first home they visit and do not want to see any more homes.  There are first time home buyers who are hard to please and will look for weeks, months, and even years.  Unless you custom build your home, it is very unlikely that you will find a home that suits all your needs.  For example, the home can be perfect with the number of bedrooms, bathrooms, layout, but the year might be small.  The house can have the perfect yard and located in a perfect neighborhood but the home can be small and the layout may not be the best for the first time home buyer.  Most motivated home buyers will normally have a home that they like and have it under contract within 30 days or less from the day they start housing shopping.

Hire A Realtor That You Can Work With And Have Same Interest In Common

Working with a realtor that have the same interests in common is extremely important.  Interview a few realtors over the phone and see how you get along with them.  Go to their websites or third party websites like Zillow.com or Trulia.com and check out their reviews and testimonials and see what the previous clients have to say.  Google the realtor’s name and see if there are multiple complaints against them and if there are, question them about it.  There are always two sides of the story and just because one or two clients write a bad review about a particular realtor does not mean that the realtor is incompetent or a bad person.  I have met realtors who I truly sincerely respect because I saw them in action on how hard they work in helping first time home buyers.  I have witnessed realtors who work with home buyers who are purchasing very small priced home that have major credit issues and without their hard work, the deal would haven’t gotten closed.  Realtors make money on a percentage of the home sales price and the amount of hours they put in on a $50,000 real estate transaction, it is like working for free.  A professional hard working realtor will always be available for you, listen to your needs, and always return your phone calls promptly.

How Many Homes Should First Time Home Buyers Visit?

It is recommended that you see at least 3 to 5 homes.  Seeing more than that and possibly more than a dozen homes, it will most likely confuse the home buyer and you will not be able to remember all the homes that you have seen.

In a hot real estate seller’s market, first time home buyers may encounter multiple purchase offers on the same property where they need to put in the offer as soon as possible.

Related> Sarasota Realtor: Ed Martinez of Keller Williams

Related> Benefits of hiring a realtor

Related> Benefits of hiring a real estate agent: Gustan Cho

Related> Importance of open house for sellers

Related> Sarasota Homes For Sale: Ed Martinez

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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