1. Start saving for a down payment early
It’s common to put 20% down, but many lenders now permit much less, and first-time home buyer programs allow as little as 3% down. But putting down less than 20% may mean higher costs and paying for mortgage insurance, and even a small down payment can still be hefty. For example, a 5% down payment on a $200,000 home is $10,000.
In speaking with a broker at JM CAPITAL GROUP , figure out what your down payment will be. Some tips for saving for a down payment include setting aside tax refunds and work bonuses, setting up an automatic savings plan and using an app to track your progress.
2. Explore your down payment and mortgage options
There are lots of mortgage options out there, each with its own combination of pros and cons. If you’re struggling to come up with a down payment, check out these loans:
- Conventional mortgages They conform to standards set by the government-sponsored entities Fannie Mae and Freddie Mac, and require as little as 3% down.
- FHA loans Loans insured by the Federal Housing Administration permit down payments as low as 3.5%.
- VA loans Loans guaranteed by the Department of Veterans Affairs sometimes require no down payment at all.
Making a higher down payment will mean having a lower monthly mortgage payment.
If you want the smallest mortgage payment possible, opt for a 30-year fixed mortgage. But if you can afford larger monthly payments, you can get a lower interest rate with a 20-year or 15-year fixed loan. Speak with a mortgage broker at JM CAPITAL GROUP to figure whether a 15-year or 30-year fixed mortgage is a better fit for you. Or you may prefer an adjustable-rate mortgage, which is riskier but guarantees a low interest rate for the first few years of your mortgage.
3. Determine how much you can afford
Before you start looking for your dream home, you need to know what’s actually within your price range. Speak with one of our qualified brokers to help you figure out what you can safely afford to spend.
4. Research state and local assistance programs
In addition to federal programs, many states offer assistance programs for first-time home buyers with perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates. Your county or municipality may also have first-time home buyer programs.
5. Check your credit and pause any new activity
When applying for a mortgage loan, your credit will be one of the key factors in whether you’re approved, and it will help determine your interest rate and possibly the loan terms.
So check your credit before you begin the home buying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit, such as making a dent in any outstanding debts.
To keep your score from dipping after you apply for a mortgage, avoid opening any new credit accounts, like a credit card or auto loan, until your home loan closes.
7. Get a preapproval letter
You can get pre-qualified for a mortgage, which simply gives you an estimate of how much a lender may be willing to lend based on your income and debts. But as you get closer to buying a home, it’s smart to get a pre-approval, where the lender thoroughly examines your finances and confirms in writing how much it’s willing to lend you, and under what terms. Having a pre-approval letter in hand makes you look much more serious to a seller and can give you an upper hand over buyers who haven’t taken this step.
Call JM Capital Group now to discuss your options at (631) 683-5405