Buying your first home requires careful consideration of your cash, credit, and income. A first-time homebuyer is anyone who has not owned a house or any real estate in the last 2 years. Here’s what you need to know… The reality of it is that there aren’t any special first-time homebuyer programs out there in the marketplace anymore. Being a first-time homebuyer does not mean what it used to. If you are thinking of buying your first home in a few years, please read on…
When most people ask the question do you have any 1st time home buyer programs? What they’re asking is do you have any programs that don’t require any down payment?
Let’s take a step back for example for a minute, shall we? Do you think you should make that large of a high-ticket purchase without any money?
If you don’t have money for a down payment more than likely it’s probable that you probably don’t have 3- 6 months or more of savings in the bank in case your financial circumstances change, or something financially goes wrong right? Don’t buy a house just because everyone else is doing it. Buy a house because you are ready and can afford it.
Yes, this might be a cold heart dose of reality, but better to have a cold dose of reality and get a course correction in your home buying plan than to buy a house you cannot afford, and then find yourself in a financial predicament which could carry dire financial consequences over the long haul right?
That said, you don’t need to buy a house with the old school 20% down. 20% down is the mantra in lending that you need to have to avoid paying foreclosure insurance also known as private mortgage insurance or PMI for short. On average PMI can cost %70 to $80 per month per $100k borrowed per month so if you look at a payment of several $100 a month, that means you must have the income to offset that plus the principal interest taxes and home insurance payment as well. If you are buying a condominium you must add in on top of that homeowner’s association payment.
It’s not just the down payment either when you buy a house. You are also responsible for closing costs. Closing can run 2 to 2.5% of the purchase price. It’s the same thing if you’ve ever financed a car. When you finance a car you have tax, docks, and, licensing at the card dealer becomes applicable and the same applies when you buy a house.
The reality of it is if you want to buy a house in most markets you need to have a down payment of at least 3.5 for FHA and 5% down for conventional loan programs. Those two programs present a surefire way to get your foot in the door. As a good financial rule of thumb, it is also wise to consider having 3-6 months of savings in the bank plus your down payment plus closing costs, don’t, have it? Maybe you have savings in the bank, but you don’t have the money to further cash. Be proactive- swallow your pride and ask mom or dad or grandma or grandpa or a family member for help. There’s no shame in asking someone for help and you might just come to find family is willing to help family more than you think.
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