First Time Home Buyer

Believe it or not first-time homebuying has become much more simplistic as compared to, for example, 2005.  Damaging Subprime and most Alt-A mortgage products have evaporated into the abyss and there now exists comparatively basic loan options.  Large purchases such as a home will always have a level of complexity but the mortgage product world has imploded down to a reasonable few.  

Typical factors weighing most heavily on first-time homebuyers:

  • How much payment can I afford?

This is managed by TWO things, loan guidelines and your personal comfort level.  Loan Guidelines determine income  using standard underwriting guidelines and then compare this to your total monthly debt.   If you seek pre-approval from a reputable lender you should feel safe you can afford the home.   Comfort Level, however, trumps guidelines.  If you do not feel comfortable with a housing payment then the fact that you met loan guidelines loses meaning.

  • How much money do I need to put down?

First Time Buyers often have less money to use as a down payment.  Mortgages still provide low money out-of-pocket options.  Popular options range from 3.5-zero% down.  Zero down is now less common but still available with some state sponsored programs (and with Veteran Administration, or VA, loans).  

The big picture summary of mortgage options that exist:

  • Conventional – non-government loans.  These mortgage guidelines are written by Fannie Mae and Freddie Mac (and usuallu purchased in loan pools after closing).  Usually requires 10% down these days with some limited exceptions.
  • FHA – the new standard.  These loans follow FHA guidelines.  FHA is the insurance agency that backs the loans in the event of default but FHA does not actually purchase loans.  Allows as little as 3.5% down payment.  This is the by far the most popular First-Time Homebuyer loan program.
  • VA (Veterans Administration) – Loan backed by the VA Loan Guaranty Service within the Veterans Benefits Administration.  Allows 100% financing for veterans (and some other past/present military designations).

FHA is still the big cahuna of all home purchasing programs, especially for first time home buyers.  They represent something close to 90% of all home purchases these days (and is increasing).

For questions about qualifying please email me at michael.pfeffer@pncmortgage.com.

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