10 Tips for First-Time Home Buyers – Part 2

Our crucial tips that all first-time home buyers should know

6. Special loans: See if you qualify for any special loans (USDA, VA, Native American)

Depending on the state that you live in, military status, employment and other factors, you may qualify for a special loan. These special loans can sometimes offer better rates, require less in down payments (typical loans require 20%) or be more lenient for requirements such as DTI and credit score. Your employer may also have an established relationship with a lender for special rates, so make sure to ask your benefits or HR team about it.

Tip: Read more about which programs you may qualify for here.

7. Mortgage assistance: Find out if you qualify for any assistance programs such as down payment assistance or grants

As a first time home buyer, you may qualify for special programs or assistance. Most lenders require at least 20% of the value of your home for down payment or otherwise require private mortgage insurance until your equity is 20% the value of your home. These programs could include down payment grants (free money for down payments), down payment assistance loans (helps you pay the down payment by borrowing money at a low rate or deferred payment), forgivable mortgages (loans for down payment that erase once a buyer lives in the home for a certain amount of time), down payment savings match (programs that will match the amount you put in your down payment), home buyer tax credit (tax credit from your state or the IRS), and closing cost assistance (state or other local agencies that cover the closing costs for buyers).

Tip: Check your local housing agency website or HUD programs by state or ask your real estate agent and loan officer. Similarly, your employer may also offer special programs such as covering your closing costs to encourage home ownership among employees.

8. Loan pricing: Compare rates and fees from multiple lenders

Only 30% of Americans compare rates between lenders, despite the fact that those who don’t compare rates pay on average an extra $300 more per year.We recommend that you compare quotes from at least three lenders, taking into account the different rate types (adjustable rate mortgage vs fixed rate) and points (paying upfront fees to lower interest rates).

Tip: Remember to get quotes around the same time for each lender so that your credit score doesn’t take a hit each time (your credit score won’t be affected each time if the credit inquiries all happen around the same time as the credit bureaus recognize that you’re probably shopping around for rates). Some lenders will even offer you a lower rate if you open a savings account at their bank. In addition to the rate, don’t forget to shop around for other considerations such as minimum down payment, closing costs, private mortgage insurance (monthly cost for having less than 20% down), and prepayment terms (ability to pay off loan early). Read more about how a tool like Sora can save you thousands of dollars by quickly comparing rates for you.

9. Home insurance: Shop around for home insurance

As you did with lenders, make sure you compare home insurance offerings. Again, make sure to ask your realtor or friends and family for any recommendations they may have.

Tip: Compare not only the price, but the coverage, premiums and satisfaction of customers.

10. Written agreements: Have promises of repairs and renovations written in writing 

Before closing, often during a walk through or inspections, you and the seller will agree on any repairs or renovations that need to occur before closing.

Tip: Make sure to get those in writing such as an email so that both parties have it to refer to later, ensuring that there are no misunderstandings.

If you missed part 1 of top 10 tips for first-time homebuyers, read it here!