USRES Lending First Time Buyer's Guide

When you’re just starting out, the journey toward purchasing your first home may seem like a long, winding road of confusion. You may be wondering if now is a good time to take on the responsibility, or if you can truly afford a home of your own. This is where we work together, and take the time to really figure out what’s the best decision for you. Whether you’re getting ready to walk down the aisle, adding a baby to the family, or transitioning out of a rental property, USRES Lending will guide you in reaching your goal of homeownership.

Many first-time home buyers don’t think they can qualify for a home loan, but the truth is, there are many types of mortgages available, even for first-time buyers. We can help you determine if now is the time to buy your first home, and which loan program is right for you. We’ll listen to your unique situation, ask the important questions, and guide you in the right direction to make the best home financing decision.

We understand buying a home is a complex decision. We would like to provide you with some additional information, so you can make the best choice possible for your individual circumstances. Here are some of the things to keep in mind before making a decision.

First Time Buyer Benefits Include Opportunities to:

  • Gain home equity by paying principle. The principal portion of every mortgage payment you make has the potential to grow your asset.
  • Take advantage of tax benefits as mortgage interest and real estate taxes are usually tax deductible. (Consult a tax advisor regarding the deductibility of these items.)
  • Build your credit by making on-time mortgage payments can help you create and keep up a strong credit history.
  • Own a home that suits your needs and lifestyle.

Buying your first home also comes with added responsibilities:

  • Commitment to making a monthly payment in full and on time, today and into the future.
  • Extra expenses including: property taxes, homeowners insurance, homeowner’s association dues, tax assessments, and (If you put down less than 20%), mortgage insurance.
  • Unpredictable maintenance including small expenses, like a clogged drain, to big expenses, like replacing a roof.

Financial advice

Being a first-time home buyer can be an exciting but anxious time. Educating and preparing yourself about buying your first home is the best way to calm those nerves. Let’s look at some of the important things to consider before getting started.

Financials

It is a good idea to start collecting and putting together the items that will be asked for ahead of time. There are many items needed to complete the loan process. By obtaining the necessary financial information ahead of time you will be able to expedite the entire process. For a complete list please refer to our loan process and documents section. It is our intention to make the loan process as simple and easy as possible for you, and by gathering this information ahead of time we can work together to accomplish that goal.

Credit

One of the best things you can do, to help yourself prepare for what’s to come in the home buying process, is to check your credit rating with the 3 credit bureaus: Equifax, Experian, and TransUnion. Clear up any errors that may appear on those reports as soon as possible. Another way to improve your credit score, is to reduce the balances on your current accounts to under 30% of your credit limit. Your credit score plays an important factor in determining how much you are qualified to borrow, so it’s important to get the best score possible. If you have any additional questions on your credit score one of our home loan experts would be happy to personally assist you.

Less than Perfect Credit?

While good credit is ideal, unfortunately many of us don’t fall into this category. The good news is that we do offer many types of mortgages to those with not-so-perfect credit, and chances are you may still be able to qualify for home financing. If for some reason we are unable to get you home financing right away, it is our pledge to work with you and develop a plan, so that you can reach your goal of homeownership. We hope to become your “lender for life” and look forward to working together to help you reach your home financing goals today and into the future.

Costs Associated with Your Purchase

Saving money is also a top priority for new home buyers. By saving money for a greater down payment you will reduce monthly payment, and possibly obtain a lower interest rate. Buying a new home requires a few different types of up-front costs. By understanding those expenses, you will be better prepared when you start the process:

  • Earnest Money– Money you put up front to show that you’re serious about purchasing. The earnest money deposit is put into escrow, and kept as good faith on your part. Once you get to closing that earnest money becomes a credit towards your down payment and/or closing costs.
  • Home Inspection- Most buyers choose to obtain a home inspection on the property they are buying. This is done to protect you from major defects that may not be seen and to get an overall picture as to the properties condition. Talk to your real estate agent to get more information about this process and the cost.
  • Appraisal- It is required that you have an appraisal completed on the property you are buying. You can find more information about this in our understanding appraisals section. This is generally the only up front charge associated with obtaining a home loan.
  • Down Payment– This initial payment (usually 5-20%) is put toward the home’s total price. However, if you don’t have that amount there are also loan programs that allow you to qualify with as little as 3.5% down. In some cases, you can even obtain your down payment costs through a non-profit organization or a relative. VA also allows active military and veterans a zero down payment option for those who qualify.
  • Closing Costs – Expenses associated with obtaining a loan, such as processing fees charged by the lender, escrow fees, title fees, and anyone else involved with the home sale. We will provide you with a “Good Faith Estimate” (GFE) which gives you an estimate of all the closing cost fees ahead of time. In some cases some or all of these fees can be paid by the seller.

Preparation

We strongly suggest that you don’t make any major changes in your current banking or spending habits, such as opening new credit accounts or making a large purchase. If you make a large deposit or withdrawal you must be able to be source and explain it. A job change can also adversely affect your application, so you may want to postpone your next career move until you’re settled in your new home. Another thing to think about is co-signing for a friend or family member, as that may adversely affect your loan application. Paying cash for your rent payments will make them hard to verify so it’s important to pay by check so it can be verified. These are just some of the things to think about when looking to buy your first home. If there is anything that is questionable please call one of our home loan experts and we will be glad to answer any question you may have.

Pre-Approval vs Pre-Qualification

We offer both pre-qualification and pre-approval services. There is a significant difference between the two and it’s something you must be aware of when looking into buying a home. A pre-qualification is when one of our home loan experts consults with you over the phone, and reviews your credit to come up with a determination on your ability to qualify, and for what amount. The advantage to this is that it can be done quickly over the phone and you can get an immediate pre-qualification letter in most circumstances. The problem with this process is that our home loan experts have not been able to review all of your financials and get a complete view of the whole picture over the phone. The best and most recommended way to go about this process is to get a pre-approval. If you’re looking for the fastest route to closing, our pre-approval program helps get the paperwork out of the way first. Once you’re pre-approved, you’ll have a real advantage over others in a hot real estate market and sellers will know you’re serious. Pre-approval also means you can focus on the enjoyment of shopping for a home. It is important that you understand the difference, and understand that our preferred method is a pre-approval because this is about you, and we are determined to provide you with the best lending experience possible.

Choose the Right Loan Officer

Finding and choosing the right loan officer is important, especially for your first mortgage. Working with a good loan officer can help you get preapproved, and determine what loan option is the most beneficial for your needs and lifestyle. Our home loan experts will conduct a thorough interview with you to make sure we are putting your best interests first. Whomever you choose to work with will come to know a lot about you, and will be involved in one of the biggest decisions you will ever make. It’s important that they are trustworthy, make themselves available to answer your questions, and are knowledgeable on all the different types of loan products available.

At USRES Lending, our loan officers will help you prepare, you so you feel confident about your decision to buy a new home. We will educate you on the different types of mortgages available, teach you how to get a mortgage, and relieve any fears about the process, ensuring that you are 100% comfortable with your home loan.

Working with a Realtor

A real estate agent is someone that will be with you from start to finish. They’ll be responsible for finding you the perfect home, negotiating on your behalf to get you the best deal, and handling all the paperwork that’s involved with buying a home. They can offer a wealth of knowledge and insight, not only in real estate, but also in the communities where they work. They know all the great spots in town and what neighborhood best suits your needs. Before making a purchase there are some things you should think about and understand in terms of what you and your family need in a new home. It’s time to make a checklist of things you’re looking for in a house: How many bedrooms? How long of a commute can you tolerate? Do you want to live in the suburbs or near downtown? The more details you provide, the easier it will be for your agent to find something that accommodates your lifestyle. Ask friends and family for recommendations, and always interview candidates before choosing the right agent for you. USRES Lending can match you with a trusted, pre-screened agent through our unique scorecard system to ensure the best possible home buying experience!

Homeowners Tip

If you’re planning to stay in your home for the foreseeable future, you may want to plan ahead for the types of repairs all homes eventually need. For example, if you factor in a maintenance “allowance” equal to approximately 2% of your home’s value each year, you’ll be better prepared to manage the cost of repairing or replacing heating, plumbing or other systems.

Loan Types

As a first time home buyer, you may be concerned about keeping your mortgage payments low, especially for the first few years. Our mortgage specialists will help you choose the best home financing option, so you can afford your dream home without struggling to pay your mortgage each month. We have a wide variety of loan programs for first time homebuyers including:

  • Fixed rate mortgages: 30 Year, and 15 Year fixed rate mortgages are the most popular in this category. The mortgage interest rate will remain the same on these loans throughout the entire term of the mortgage. Our popular 30 Year fixed rate mortgage is often the best option for first time homebuyers.
  • Adjustable rate mortgages: An adjustable mortgage has an interest rate which is fixed for a period of 5, 7, or 10 years and then can adjust periodically based on a pre-selected index. The advantage of hybrid ARM’s is that you may be able to afford a more expensive house because your initial interest rate and payments will be lower in the first few years.
  • FHA loans: This is a low interest loan insured by the Federal Housing Administration which is open to all qualified homebuyers. While there are loan amount limits for FHA loans, they are usually sufficient to cover most moderately priced homes anywhere in the country.
  • VA Loans: A long term, low or no down payment loan guaranteed by the Department of Veterans Affairs. This option is restricted to individuals qualified by military service or other entitlement.

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