First Time Home Buyer Tips

Complete First Time Home Buyer Tips & Information.

Q: What are the benefits of buying versus renting?
A: The short answer is that a home can be an investment, will increase in value, will provide you with more privacy, enjoyment and freedom. Also, the mortgage interest is tax deductible and will result in substantial yearly tax savings. We cover this in more detail in our article: 6 Reasons You Should Buy Your First Home.

Q: After paying rent, utilities, car payment, food, clothing, gas, phone, and everything else, there is no way I can save for a down payment. What can I do?
A: That's a Catch-22. Once you own a home, the equity in it will be the source for your next down payment when you sell and move into another house. However, as a first time home buyer, you do not have any equity in any property, thus you'll have to come up with the down payment another way, and saving enough for a down payment can be next to impossible. Most states as well as the Federal Government offer financial assistance, including outright cash gifts for use as a down payment, to first time home buyers. Please visit first time home buyer grants to see what is available to you.

Q: With home prices so high, should I wait to buy until prices come down?
A: Well, probably not. Prices may indeed come down, and might even come down significantly. However, prices are directly related to interest rates. When interest rates fall, that makes monthly payments more affordable and prices get bid up due to an increase in buyers. Conversely prices fall when interest rates go up. Let's assume that you are looking at a home that is listed for $200,000. With interest rates currently running at about 6.5%, the monthly payment on a $200,000 loan would be $1,264.14. If interest rates continue to rise (a very likely scenario), the price of that house might fall to $150,000. However, at an interest rate of 10%, the $150,000 mortgage loan would have payments of $1,316.36. As you can see any savings in the cost of the home would be offset by an increase in the interest cost because of a higher interest rate. In this example, there would be no reason to wait, and this doesn't even take into account tax savings, which would add to the reasons to buy now instead of waiting.

Q: Should I use a real estate broker?
A: Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be overwhelming. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you'll want to know about a neighborhood you may be considering...the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. He or she will help you figure the price range you can afford and search the classified ads and multiple listing services for homes you'll want to see. With immediate access to homes as soon as they're put on the market, the broker can save you hours of wasted driving-around time. When it's time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don't have to pay the broker anything! The payment comes from the home seller - not from the buyer. There is a new service for finding real estate agents that is highly recommended. Not only can you find an agent, but with this service you can have agents compete for your business by offering part of the commission back to you in the form of a rebate. Imagine getting a check for $500, $1,000, $1,500 or more back from the agent after you have bought your first home. There is no charge whatsoever to use the service.  Learn How to Get Realtors to Pay You to Buy Your Next Home on HungryAgents.com.

Q: My Credit isn't perfect. Should I try to improve my credit score before applying for a first time buyer loan?
A: Yes. Improving your credit score will likely take a minimum of 2 months, but will be well worth the wait. By getting a higher credit score, you will greatly increase your chances of approval on the loan as well as qualify for the lowest rates given only to those people who have the best credit rating. An excellent resource for raising your credit score is available for free. You simply pay $1.97 for shipping. We highly recommend the Free Credit Repair Kit for those in need of improving their credit score.

Q: My husband and I are looking at houses in the $225,000 price range, but we don't know if we can qualify for a mortgage of that size. Should we get pre-qualified for a mortgage, and how much will it cost?
A: Yes, it is a wise move to get pre-qualified for a mortgage before you make an offer to a seller. Having been previously approved by a mortgage lender removes a large amount of uncertainty in the seller's mind, and increases the likelihood of a quick closing. With pre-qualification, you'll be in a stronger position to negotiate a better price on the house that you would like to buy. Prequalification is quick and easy. Some lenders charge for the service, others don't. To get a free, no obligation pre-approval from some of the nation's best mortgage lenders, visit ING DIRECT Orange Mortgage.

Q: Do you have a forecast on mortgage rates?
A: Yes, we do. Please see our Mortgage Rate Forecast for where we believe mortgage rates are headed this year and next.

It is highly recommend that you also visit the First Time Home Buyer Grants page for free assistance with the down payment. This will make it possible for many people to qualify for a first time home buyer loan who wouldn't have qualified without the grant assistance.

Return to the First Time Home Buyer Programs for other types of 1st Home Buying assistance.