First Time Home Buyer(FTHB)

In this tremendous buyer’s market, there has never been a better time for a FHTB to purchase a property. A FTHB is considered someone who has not owned a property during the past 3 years. 

There are some Federal, State and even county grants and subsidies for FTHB's. They have certain income as well as property location restrictions. You will also need to take a debt management class prior to closing to be eligible. These funds can be used to pay for down payment and closing costs. We work with these agencies to apply for such programs. This money is available while it lasts. But even if that program is not available you may still qualify for others. It also adds more time to the application process since we have to comply with government processes and procedures. However, it is a great way to purchase a property if you don't have the funds for down payment or closing costs. One way of obtaining 100% financing including closing costs is through our USDA Rural Area program. But the property must reside in a designated rural area plus there are some income restrictions. Otherwise we can put you into our FHA program with 96.5% financing and get your 3.5% down from one of our down payment assistance programs.

Since you are a FTHB you should get familiar with all the steps necessary to buy a property. Learn as much as possible before you make a decision to buy. We have identified below the main steps to follow so that you can be prepared to make an informed decision when purchasing your dream home:

There are many factors we consider when prequalifying you to buy a home. Following are just some them:

• Credit Scores - a minimum of 600 credit score is typically required but this numbers changes constantly so call for the latest. Scores lower than 600 may qualify if there are other compensating(positive) factors to consider so the best thing to do is call or email us.
• Monthly Housing Payment - when calculating the price of a house you qualify for, we have to add your monthly taxes, insurance and homeowners association fess if applicable. This is called your PITI payment for Principal, Interest, Taxes and Insurance. For example your monthly mortgage payment on a $200K property with 3% down payment on a 30 yr fixed mortgage @ 6% is $1163.12. To that we have to add taxes which if we estimate at $300/mth, and estimate your homeowners insurance to be $150/mth, your total payment would be $1613.12 plus private mortgage insurance(PMI explained below) plus whatever the association monthly fees are. That’s the payment you’d have to qualify for. To have an idea how much your property taxes will be go to our useful links and click on the appropriate county.
• Debt-to-Income-Ratio(DTI) – this is the ratio of your monthly obligations divided by your gross salary income. If we add to your housing payment calculated above your other liabilities such as car payments, credit card payments, student loans, etc., that would constitute your total monthly liabilities. If we divide that by your income, it would yield a certain DTI. The DTI limits for FHA are set at 43%. However, customers with DTI’s much higher can qualify if they have compensating factors such as high credit scores, reserves in the bank, putting a larger down payment, high income, etc.
• Job history – at least 2 years of continuous job history is required. However, for FTHB’s that just graduated from college and just started a job, they would still qualify provided that proper documentation about the job contract, and college history such as diplomas, transcripts, certificates, etc., are furnished.
• Private Mortgage Insurance(PMI) – when purchasing a property with less than 20%, the lender will require the borrower to pay for mortgage insurance to cover for the higher risk that the borrower represents to the lender in case of default. This can vary depending on the loan amount or percentage to be financed. On conventional loans the PMI is paid monthly and added to the monthly mortgage payment. On FHA loans the borrower has to pay 1.75% of the loan amount up front, but this amount can be financed. In addition, there will be a monthly PMI fee added to the mortgage monthly payment.
• Down Payment – if you have 10% or more for down payment and have higher credit scores, a conventional loan may be more appropriate and less costly from a PMI standpoint than an FHA loan. However, if you don’t have a lot of down payment or none at all then we will have to go FHA and identify one of the sources in our down payment assistance page. Some programss are for FTHB’s only while others are for everyone.
• Closing Costs - there are closing costs associated with the loan that fluctuate between 3-6%. Both FHA and conventional lenders allow the seller to pay up to 6% towards the buyer’s closing costs. If you can't negotiate this with the seller, you will need to show enough reservers to cover them at closing.

As a new buyer you need to be aware of some of the upfront costs associated with the purchase of your property:

• Appraisal fee – the lender requires an appraisal of the property being purchased. An appraisal is a home valuation that protects both you, the borrower, and the lender. It keeps you from paying too much on a house that may not be worth it’s purchase price. It also keeps the lender from risking more money than they have to in a property. This fee has to be paid upfront and is typically paid by the borrower(around $400).
• Inspection fee – a home inspection is an inspection of all the systems in a property, electrical, roof, structure, tiles, plumbing, etc., to ensure that the house is in proper working order. It is also paid by the borrower(around $300). On FHA loans this is not required. On conventional loans it may be required. Either way it is highly recommended to have one.
• Home Owners Insurance(Hazard) – the lender requires the borrower to obtain hazard insurance with certain minimum limits to protect the lender in case the property is destroyed by fire, hurricane, etc. The lender requires a 1 year policy to be paid in advance.
• Termite Inspection – FHA does not require a termite inspection but a conventional lender may do. In any case it is always a good idea to have it done. This costs approx. $50-$75.

All of this may sound overwhelming especially if you are a FTHB. However, we will take you by the hand along every step of the way to make sure you feel comfortable. We will also explain the process and available for consultation anytime for any reason.

Call or email one of our agents for a FREE consultation or apply online.