Debunking Some Common First-time Homebuyer Myths

First time homebuyers have many questions concerning things they must consider when buying a property, the amount they must spend, and the different sources they can tap to finance their investment. To assist first time home buyers in Texas and other parts of the U.S., many government bodies operate loan programs for first time home buyers. The aim of these programs is to help first time homebuyers secure home loan at relaxed norms. It is also important for homebuyers to avoid some common myths related to buying a home for the first time. To help buyers take steps in the right direction, the post lists some such misconceptions and corresponding facts. Take a look.

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1. Buyers Must pay 20 Percent of the Loan Amount as Down Payment

Many buyers think they need to pay 20 percent of the loan value when buying a home. Though there is no denying the fact that paying 20 percent down payment can help lower your interest rates, this certainly is not a qualifying criterion to get a loan. Many  lenders offering conventional loans accept a lower downpayment, if you are willing to pay a higher interest rate. Opt for a private mortgage insurance, a fee that lenders charge for borrowers who pay less than 20 percent down payment. You can also opt for a loan program backed by government bodies such as USDA loan, VA loan, or FHA loan that have relaxed down payment norms.

2. Buyers With bad Credit Cannot get a Loan

A good credit score is one of the important factors lenders consider when approving a home loan case. That said, many lenders offer loans to buyers with bad credit provided they are ready to pay a higher interest rate. Further, lenders offering VHA, USDA, and FHA loans have relaxed credit score requirements and in some cases lend even to borrowers with a weak credit score (600 or less).

3. Using the Services of a Real Estate Agent is a Waste of Money and Time

There is no denying the fact that in this Internet age buyers can get important info with the click of a mouse. Many real estate sites have listings that provide info about vacant properties, and circle rates. All properties, however, are not listed which can result in the buyer missing out on some good houses within their budget. Local realtors have info about such properties and can help the buyer get the best deal according to their requirements. Further, real estate agents are negotiation experts and can help their clients save more when investing in a property.

4. A 30-Year Mortgage is Always the Best Option

Many first time home buyers prefer opting for a 30-year mortgage instead of a 15-year one due to the low EMI. 30-year mortgages, however, have a higher interest rate. When choosing between the two mortgage terms, it all comes down to the buyer’s preference. Borrowers who are cash strapped but do not mind paying a higher interest rate can opt for a 30-year mortgage. For buyers with a steady income and savings opting for a 15-year mortgage can be the better of the two options.

Conclusion

Buying a home for the first time can be a daunting task as the buyer, in most cases, has no or very limited clue about the factors to consider when investing in a property. If you are a first time homebuyer, avoiding these myths can help you take informed decisions. Further, when opting for a loan, discuss the pros and cons of different programs with your lender or a loan consultant.

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A Guide to Help Understand My First Texas Home Program

Financing is one of the most important considerations when buying a house. Homebuyers need to research about the available home loans to choose one that suits them best. The decision can be difficult, particularly for first time homebuyers, as they have limited knowledge about where they can look for the best deals. To make homeownership more affordable and easy to obtain, the state of Texas runs My First Texas Home Program. To help spread awareness about the program, the post discusses some important info about it. Take a look.

First Texas Home Program

Eligibility Criteria

  • Available for households that fall in moderate and low income group.
  • The property must be located in Texas or a federally declared disaster area.
  • The borrower must be a first time homebuyer. Buyers who have not owned a home in the last three years are also eligible.
  • The property must be the buyer’s primary residence.

Types of Homes Financed

You can get a first time homebuyer loan to finance a new, existing or under construction house subject to a couple of conditions:

  • The price of the home must not exceed $370,379.
  • The house must have a permanent base and should comply with FHA guidelines.

Advantages

  • Competitive interest rates.
  • Down payment assistance available.
  • Long repayable mortgage (30 years).

Documents Required

When applying for a My First Texas Home loan, applicants would be required to submit certain documents that the lender will study to determine whether the borrower is in a financial position to afford the mortgage. Some of the common documents required by most lenders are:

  • Salary stubs and tax statements for the last three months.
  • Copy of the sale contract.
  • Recent bank statements of all the accounts held by the borrower.
  • Credit report.
  • Details about the outstanding amount, account numbers, and the nature of debt owed (in case of long term debts).
  • Proof of additional income.

Application Process

My First Texas Home loan program is backed by The Texas Department of Housing and Community Affairs. Loans are provided by private lenders recognized by the body. After the applicant files the application and submits necessary documents, the lender will evaluate different factors such as the individual’s debt obligations, income, employment status, and credit rating to determine whether they’d be able to abide by payment timelines. The lender would also pre-qualify the applicant on the basis of their financial standing.

Summing up

My First Texas Home is one of the most accessible programs for first time homebuyers in Texas. Texas also has other assistance programs for homeowners to help them buy the house of their dreams. Irrespective of the program they choose, it is important for buyers to compare them as this’d help them identify the best option according to their situation.

Read-on to Learn About My First Texas Home Program

Finding the house of your dreams is a daunting task. You need to deal with the realtor, negotiate with the owner, and comply with various legalities and paperwork, before you can call yourself a proud owner of the house. Additionally, you also need to acquire finance, usually through a home loan. The loan application process usually proves to be the most challenging for those who rush-in without adequate groundwork. Things are, however, different for first time home buyers in Texas. The state runs a mortgage program called My First Texas Home Program, or Bond Program 77, which seeks to make homeownership affordable for first time homebuyers. The blog discusses the loan program in detail.

Eligibility criteria

Ideal candidates are those who haven’t owned a home in the last three years. The target property should be located in Texas. The program aims provides aid to first time homeowners, however, there’s an exception to this rule and those who own homes in federally designated target areas or regions declared federal disaster areas (region affected by natural, social, or technological hazards) are also eligible. Additionally, the program only applies to households with low or moderate incomes.

Application process

The Texas Department of Housing and Community Affairs oversees the program but does not offers loans to buyers. You need to apply for a loan with a private lender. Once you file your application, the lender takes into account various factors like your income and employment status, debt obligations, and credit rating to decide whether you’re a suitable candidate or not. The lender also informs you about the price range of properties you can purchase. You may also need to  bear nominal closing charges once you receive approval.

Types of homes that the program finances

The maximum sale price of the property should not exceed $370379. You can buy a new, existing, or an under construction house that has a permanent base and complies with FHA guidelines.

Documents you need to file

The lender will require certain documents to judge your financial standing and take a decision on your candidature. It is therefore, imperative that you keep the following papers ready at the time of filing the application.

  • Most recent bank statements of accounts that you hold
  • Salary slips and tax returns for the last three months
  • Detailed Information about long term debts mentioning the amount you owe, creditor details, and account numbers
  • Proof of additional income, if any
  • The sales contract

There are many other programs for first time home buyers in Texas. It is imperative that you learn about these lending schemes before taking a final decision to ensure that terms and conditions of the arrangement suit your requirements. If you find understanding the regulations difficult, don’t hesitate to seek assistance and clarification from your lender.

5 Mistakes First Time Homebuyers Need to Avoid

Many people think they are ready to become homeowners once they get financially sound. First-time home buyers, be it in Texas or another state, need to consider multiple factors before they sign the dotted line. The factors include mortgage expenses for property maintenance and insurance costs in the future, which they often forget to evaluate. To help, we have highlighted five mistakes you need to avoid when purchasing your first home. Let’s begin.

1. Factoring only the mortgage expense

One of the biggest mistakes many first-time home buyers do is not taking into account the expenses other than the mortgage payment. These expenses include the property insurance, maintenance costs, water and electricity bills, homeowners association dues, and taxes. In fact, since property taxes and insurance tend to go up every year, you should calculate both mortgage amount and the additional expenses you need to bear after purchasing a property.

2. Searching a house first, and getting pre-qualified later

Another mistake that homebuyers make is looking for a property without assessing their current eligibility. The first step should ideally be getting pre-qualified first, which gives a clear picture about how much mortgage loan you are likely to get based on your current and past financial status. When you know how much amount you have been approved for, selecting your dream house becomes easy. Otherwise, you would be wasting your, seller’s, and the agent’s time.

3. Not getting a home inspection done

Getting a home inspection done buying a property is a due diligence step when purchasing a property. Unfortunately, that’s where many first-time home buyers miss out and end up paying more than what is required. A home inspector can help you save thousands of dollars on repair expenses on the property you intend to buy. That’s one big reason sellers and buyers use an escrow account these days. Once the pre-inspection process is complete, the party managing the escrow account can transfer the funds to the seller and the title to the purchaser.

4. Choosing a property in a haste

Unless the property you are planning to purchase fits perfectly based on your requirements such as price, size, and the location, it is not ideal to make a decision in a hurry. The housing market is thriving in the states like Texas, and you will get a plethora of options. If you find a suitable property that may be a little pricey considering your budget, you can still afford it. There are programs for first-time homebuyers in Texas that provide financial assistance to prospective homebuyers with minimal down payment and low-interest rates.

5. Not seeking professional assistance

Buying your first home is almost like venturing into an unknown territory. There are many requirements and rules, and you aren’t familiar with every one of them. Seek an experienced mortgage expert, who can help get your dream house at competitive interest rates in your preferred location. Mortgage experts have thorough knowledge about specialty mortgage loans and they also help with the application process.

Conclusion

So these were some of the common mistakes that first-time homebuyers tend to commit, whether in Texas or some other part of the US, and should be avoided at all costs. Home buying is one of the biggest investments, and therefore, you got to take all the due diligence steps to ensure that you get the best out of your investment.

Mortgage Pre-qualification: Bursting the Bubble

pre qualificationBuying a home is perhaps one of the biggest purchase decisions you will ever make. But if pre-qualification agreement is something that is stopping you from applying for a home mortgage loan then this brief read will help you understand the importance of pre-qualification and how it is different from pre-approval.

Common Misconception
First time buyers often confuse pre-qualification with pre-approval, while them being two different terms. Pre-qualification is an estimation of your qualification for a mortgage or an estimation of your affordability based on your financial situation over the past two years. It is important for buyers as it helps them narrow down their options and focus on how much amount you can afford to spend on the house you want. But it has nothing to do with the commitment between you and the lender whatsoever.

For discerning buyers, the pre-qualification comes in as an essential process that most  prospective buyers are in a habit to overlook. Considering stringent lending guidelines, it is essential to know where you stand before you set your sights on a home that you just can’t afford.

Here is a list of common misconceptions first-time buyers often have about pre-qualification, and we tell you where you went wrong.

1.It’s Similar to Loan
First-time home buyers often commit a mistake of considering pre-qualifications as loans, however, they are not, “pre-qualification helps you identify the amount of mortgage for which you qualify and has nothing to do with the loan commitment, whereas, once you’re approved for a loan, that’s a commitment.”

2.You don’t need to Research the Lender
As pre-qualification enables you to decide the amount you can seek as loan, you would be able to find a lender who can put you at ease with that much of lending amount. Simply put, it enables you to identify a lender that makes your home mortgage loan an easy proposition.

3.You’re Bound to a Single Lender
Just because you took assistance of a lender in pre-qualification agreement, it doesn’t mean you are obligated to use them as final lenders. However, mostly lenders will entice you to work with them on the home mortgage loan, but by no means should you feel bounded.

4.You don’t need to Prepare
Just like it is important to prepare for a mortgage loan, it is always suggested to prepare for pre-qualification. If we go by the books, having a pre-qualification agreement before applying for a loan facilitates smooth transaction of loan, as lender will be in better position to decide the size of the mortgage you can afford. To help you a little this is what you may require:

  • Proof of employment or last month’s salary slip
  • Tax return from previous 2 years
  • A credit report from—Experian, TansUnion and Equifax.

5.It’s OK to Lie a Little
Never! For first-time buyer even an ounce of fudging with pre-qualification agreement can risk your credibility dampening your chances of home mortgage loan. It is suggested to tell your home mortgage lenders everything they need to know, ranging from your sulking credit report to any rental property that you own.

Bottomline
In a nutshell, mortgage pre-qualifications is definitely a good idea not only for first-time buyers but also for every serious buyer. Having mortgage pre-qualifications agreement enable home mortgage loan lenders decide the amount of loan you can afford to pay. Last but not the least, before applying for loans, ensure that you present a true picture of your finances in pre-qualification agreement.

Home Loan Options to Help You Purchase Your New Home

First time homebuyer program texasAre you looking to own a home in the beautiful state of Texas? Have you shortlisted the location of where you want to buy your desired home? Buying a home on your own can be a daunting task. After the tedious process of selecting a property of your choice, you need to go through the uphill task of getting a home mortgage. It’s a key step that will take you towards fulfilling your dream.

Thorough research will give you a clear idea about the various home loan programs in Texas and whether you are eligible for these programs or not. Due to the economic slowdown, the real estate sector has been sluggish. Such a grim scenario is making things difficult for home-buyers to find a reliable mortgage company and to initiate the home buying process. A reputed mortgage company can educate and guide home-buyers regarding the various home loan programs available. There are even Texas-specific programs that have been designed for the citizens of this state.

Choosing the right home loan program can be a difficult task. Many of the first time buyers are not aware of the various loan options that are available. In order to resolve their financial woes, home buyers can opt for the following mortgage options once they meet the eligibility criteria:

FHA Loans:
This is one of the most popular home mortgage options available for first time home-buyers. This program is offered by the Federal Housing Administration (FHA). The present economic scenario and the situation of the housing market have resulted in many buyers opting for FHA loans. This program is insured by the Federal Housing Administration (FHA) and borrowers need to pay mortgage insurance along with their repayment amount.

This home mortgage program is specifically beneficial for people who earn less and look for low down payment options. Borrowers can make a down-payment as low as 3.5% of the total loan amount. Introduced in the 1930s, the loan program mainly aims at reducing the number of defaults on loan payments.

Conventional Loans
Conventional loans are offered by private lenders, these are not guaranteed by the government. You are eligible to get these loans if you meet the specific conditions such as a good credit score, reasonably good monthly income, and low or zero outstanding debt. However, qualifying for these loans are comparatively difficult due to stringent lending regulations these days.

VA Mortgage Loan
People opting for Veteran Affairs (VA) mortgage loans need to meet some conditions to qualify to get these loans approved. Specifically designed for the veterans of American armed services, VA loans are guaranteed by the United States Department of Veteran Affairs.

Texas VLB Mortgage Loan and Texas First Time Home-buyer Bond Program are some of the other attractive loan programs available for people looking to buy a home of their choice.