Essential Tips For First Time Home Buyers

Because buying a home is always a somewhat complicated process, it is important that you prepare yourself if you are buying your first home. For instance, there are many strategies that can help you avoid buying a bad home, and there are an equal number of resources available to help increase your chances that your first home qualifies as the home of your dreams. Finally, because buying a home in Williamsport – or anywhere else in Pennsylvania - is always a huge financial investment, it is necessary to approach this type of purchase from an investment standpoint.  

Location, location... you get the idea 

Something that will impact your happiness is the location of your home. For instance, its distance to amenities will impact how much you enjoy your free time. Additionally, from a perspective of safety, crime rate is always something to consider. 

In terms of an investment, your home will appreciate or hold its value better if it is centrally located and in close proximity to the best schools. Finally, you need to assess the actual location of the home on the lot. For instance, if it is centered on the lot, it might be more desirable than if it is crammed right next to your neighbors. Finally, if the house is on a secluded road, it is often considered more valuable than if it is on a highway or a main strip. 

Wherever you decide to live, make sure you can comfortably afford your new home. D. Shane Whitteker is the owner and chief broker at Williamsport, PA mortgage broker Principle Home Mortgage. He advises against maxing out your budget to buy the most home you qualify for.  

“I think in general this is a bad idea,” Whitteker says. “Being house poor makes a person more likely to end up in foreclosure.  This also will potentially create large amounts of stress relating to finances. You are better off starting lower and selling that home after 5 to ten years and putting the money down on your next home.  If you do this two or three times you can end up with a much nicer home down the road without breaking yourself up front.” 
 

Keep your mind on your finances 

When it comes to buying your first home, you want to be as prepared as possible. Simply put, you should not approach the buying process empty handed. Prior to making a bid on a house, you should have the following funds or assets. 

- down payment  

- loan pre-approval letter 

- closing cost payment 

- money for inspections: structural, radon, termite 

Finally, you should have two important pieces of information: your credit report and your income-to-debt ratio. 

In terms of your credit report, you will obviously have little problem getting a loan if you have solid credit. However, even if you have fair to medium credit, you can sometimes still get a loan as long as you are able to remedy all the problems on your credit report.  

Contacting your local mortgage broker can often be a good first step in repairing your credit. They’ll be able to explain exactly how your credit score impacts the mortgage you can get, as well as help you improve your credit score over time.  

In terms of your income, you should keep your outgoing debt obligations to no higher than 30 to 36 percent of your overall net income. Doing so will let banks know you have the financial capability of paying your mortgage and still have enough to live on.  We call this the front-end ratio, the back-end ratio will include your current debt and your proposed housing debt as well.  The maximum ration on the back end is typically 56%-57%.  This is dependent on other factors such as credit score and credit history.  It would be better to not plan to be in the highest possible debt to income ratio to qualify. 

Depending on your loan amount, the required down payment will vary. FHA loans, for instance, require lower down payments than conventional loans. Additionally, if you can place a 20-percent down payment, you will not have mortgage insurance tacked onto your mortgage with conventional financing. 

Once your home is purchased, you’ll also have to pay property taxes. According to Whitteker, those taxes are highly variable depending upon the specific circumstances of each individual home owner.  

“This depends on the property; different locations have different levels of real estate taxes,” Whitteker says. “This information is typically posted with the property online but you need to make sure you verify this amount with your real estate agent.  The information online isn’t always accurate.” 

Utilize online resources 

Using online resources to research potential first homes is a modern-day requirement.  You can use a mortgage calculator to determine how much you can afford, and you can research the condition of your credit score. There are a number of sites dedicated to realty listings, and they can provide important information about a home's current condition and past tax assessments. You can review pictures of your potential house, and you can do a virtual drive by to see the type of street on which the house sits. When it comes to a buyer's agent to assist you, you can research agents and customer reviews. Finally, you can even apply for a home loan. Availing yourself of these types of resources will help you be prepared to make that initial bid.  The Williamsport branch of Principle Home Mortgage makes the mortgage application easy, just go to www.williamsportmortgages.com  to apply and work towards your pre-approval. 

Consider hiring a buyer's agent 

The listing agent works for the seller. With this in mind, you should hire a buyer's agent to work for you. A buyer's agent will negotiate on your behalf and ask all the pertinent questions you might not know to ask. A buyer's agent will be able to walk you through all the paperwork, and he or she will be able to keep apprised of new inventory as it hits the market. 

A buyer's agent also comes with his or her own network of professionals. For instance, a buyer's agent can hook you up with a reputable home inspector.  

Finally, a buyer's agent will have experience with a variety of homes. He or she can let you know that a newly painted room might be hiding mold or water damage and make a note for the inspector. A buyer's agent can also remind you that an inspector should also look at the plumbing and not simply focus on the home's structural integrity. More important than anything, a buyer's agent helps keep the buying process on schedule.  

Utilize government resources 

Getting a conventional loan is a common route for many people seeking a home loan. However, an FHA loan or VA loan will help you get approved without having to put as much money down. Doing so might result in a slightly higher mortgage and payment. However, as long as the overall mortgage does not push your debt-to-income ratio higher than 45 to 55 percent, you can still comfortably pay your mortgage and keep money in reserve for renovations.  Of course, this is different for each prospective home buyer and will come down to your own budget.   

Other government resources include renovation loans. For instance, an FHA 203(k) loan will provide you money to make updates to your home. These loans may come with a higher interest rate than a standard FHA 203b mortgage but they facilitate renovations and possibly significant equity. 

To learn more about how to become a first time home buyer, contact Williamsport mortgage broker Principle Home Mortgage today at (814) 308-0959.