Real Estate

Buying Your First Home in 2022: A Step-by-Step Guide

Buying Your First Home in 2022 - A Step-by-Step Guide

Buying a house is a lot to take in, this is especially so for a first-time buyer. But guess what? It doesn’t have to be stressful or complicated if you know what to anticipate.

This article will be your guide in terms of financial options available to you as a first-time homebuyer.

How to get started

It is not expected that you know everything there is to know about the property buying process, especially if you’re a first-time buyer. However, it comes with numerous benefits if you give yourself to learning all about the integrities of buying your home regardless of it being the first time. Having ample information at your disposal makes you more at ease and probably even learn how to get a house mortgage loan at a cheap interest rate.

Some basic things need to be checked before you get started and they are as follows:

The first thing to do is to compare mortgage providers to ensure you get the best deal. That is, you need to check out at least 3 or more mortgage companies to know the one with the interest rate that suits you.

Learn about the various types of home loans available

Even though there are hundreds of loan types available, it has been discovered that more than 90% of buyers choose one of the four major loan programs: conventional, FHA, VA, or USDA.

Hence the importance of figuring out which is genuinely financial-wise by finding the right loan that is tailored to your needs. There are loans for low down payments, bad credit, self-employed people, high loan sizes, and more. All you need to do is make the right choice for your home needs.

Determine your price range

Calculate your monthly mortgage payment, taking into account principal, interest, taxes, and insurance. Knowing your mortgage rate and your financial capability will provide you peace of mind when looking for a home and a mortgage.

And lastly, before going house hunting, get a mortgage pre-approval because many sellers will not accept an offer unless you have pre-approval from a lender.

Also, some benefits accrue to being a first-time homebuyer, especially the various loan opportunities that can help with the down payment. Some of which are discussed below.

A traditional home loan

When most people think of home loans, they think of conventional or standard mortgage loans. And this term is about these loans meeting government-regulated financial requirements. And rightfully so, it is the best option for people who have a good credit score and an initial 10% fee.

However, buyers who can only afford a 3% down payment can opt for the other types of conventional loans;

HomeReady Fannie Mae loan

Offers low down payment of up to 3% and flexible eligibility standards.

The HomePossible loans from Freddie Mac

This program is designed for low-income homebuyers, as well as eligibility for a $500 reimbursement for the borrower.

And the conventional 97 mortgages– which do not give this benefit, but they can be the most cost-effective method to buy a home with a little down payment, especially for first-time buyers.

Home loans from the Federal Housing Administration (FHA)

Most borrowers are drawn to FHA loans owing to its low down payments and flexible credit score policy, which allows purchasers with less-than-perfect credit to obtain a mortgage.

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FHA loan rates are frequently cheaper than conventional loan rates, but the overall cost of an FHA loan is frequently greater because all FHA loans need mortgage insurance premiums (MIP). Therefore, the current upfront mortgage insurance premium stands at 1.75% of the loan amount, while the annual mortgage insurance premium is 0.85% of the loan amount.

FHA mortgage insurance could easily last the lifetime of the loan if you so choose, but if you have drawn equity in your property, you can get rid of it with a refinance. Also, the property you intend to or purchase with an FDA loan has to be your primary residence as this loan doesn’t permit purchasing a vacation or investment property.

Home loans from the Department of Veterans Affairs (VA)

Offers an excellent lending program for ex-military and those still in service, like no other lender can do.

VA loans, which are accessible to veterans and active military members, provide 100% funding, streamlined loan approval criteria, and access to the lowest mortgage rates available. Consistently for the past two years, VA mortgage rates have outperformed all other types of lending with up to 40 percentage points (0.40 percent) cheaper than conventional loan rates.

Home loans from the United States Department of Agriculture (USDA)

This is a no-money-down mortgage that can be used to purchase a home in rural areas and low-density suburbs. The program was set up for borrowers with low to moderate-income to take advantage of its offers such as reduced mortgage rates, no down payment, and cheaper mortgage insurance.

The USDA has requirements that may seem high-handed, but as long as the first-time homebuyer is open to purchasing their property in a rural area with at least a population of 20,000 people, then you are well on your way to actualizing your dream.

These programs are popular because of their ease of use, inexpensive costs, and user-friendly language, and depending on what you’re looking for as a first-time homebuyer, each has its own set of advantages (lower down payment, lower credit threshold, lower-income options, etc.).

While your loan officer will assist you in determining the best form of mortgage for your needs, you should be aware of your alternatives ahead of time to ensure that you’re asking all of the appropriate questions.

Grants for first-time buyers

State and municipal governments frequently offer first-time homebuyer grants, down payment assistance (DPA) programs which can help with all or part of your down payment and closing fees.

This program translates to significant savings for first-time buyers and they come in two parts.

A first-time home buyer GRANT is money that you don’t have to repay, while a low-cost option LOAN is money borrowed to support your down payment or closing costs, which you must pay back at a low-interest rate.

The magnitude and availability of first-time homebuyer grants vary by location, as well as which program you apply for.

Determine your maximum home price limit

To determine this, think about your budget and how much mortgage loan repayment you can afford monthly, this will give you an idea of the kind of house you can go for.

The Author

Ajisebutu Doyinsola

Doyinsola Ajisebutu is a journalist and prolific writer who takes a special interest in Finance, Insurance, and the Tech world.