Are you wanting to purchase your first home but do not know where to start? Here are a few first-time homebuying financial planning tips to keep you from falling into the typical traps that come with this process.
Financial Planning for a Down Payment for your First Home
Planning for a down payment for your first home can be a very daunting task. If you are a first-time homebuyer, you can qualify for an FHA Loan. An FHA loan is a mortgage that is insured by the Federal Housing Administration (FHA). It allows you to put a lower minimum down payment and have a lower credit score. This can be very helpful for people who are able to make the actual mortgage payments, but struggle coming up with a down payment.
If you need assistance with a down payment, many states and cities will have down payment assistance programs for first-time homebuyers. Here are the requirements to qualify for down payment assistance in California.
Borrower Requirements for First-Time Homebuying
- Occupy the property as a primary residence; non-occupant co-borrowers are not allowed.
- CalHFA borrowers must complete homebuyer education counseling and obtain a certificate of completion through an eligible homebuyer counseling organization.
- Meet CalHFA income limits for this program.
*In the case of conflicting guidelines, the lender must follow the more restrictive.
Property Requirements for First-Time Homebuying
- Be a single-family, one-unit residence, including approved condominium/PUDs.
- Guest houses, granny units and in-law quarters may be eligible.
- Manufactured housing is permitted.
- Condominiums must meet the guidelines of the first mortgage.
- There is a five-acre maximum on the size of the property.
Keep in mind, you will have to pay back the down payment assistance either when you sell your home or pay it off. There are many different down payment assistance programs out there, so make sure you find the one that fits your needs best.
One thing to keep in mind when you are putting less than 20% down is that you will need to get mortgage insurance. Depending on the cost of the home, mortgage insurance can be anywhere from $50 and up. Once you reach a certain amount of equity in the home, the mortgage insurance goes away.
Location, Location, Location!
Sometimes when people are looking to buy a home, they focus more on the price than the location. It is important to keep both price and location in mind when looking for a home. You want to make sure you enjoy where you live. The best way to get a feel for a new home location is to spend some time in the surrounding area. After you look at a house, go grab some lunch or dinner at a local restaurant. You can also visit the local grocery store or park. This will help you determine if you can really see yourself living there.
Another good tip when determining the location of where you want to live is your daily commute to and from work. While a few extra miles may not seem that bad, depending on the location it could just be constant traffic.
Buying a home for the first time can be a very exciting experience, but there are many traps you can fall into as you begin this process. Make sure you consider all options available for down payment assistance for first-time homebuyers, and be aware that with less than 20% down on a new home, you will need to obtain mortgage insurance. Finally, it is a good idea to keep in mind that when it comes to planning for a new home, location can be just as important as price!
Contact us if we can assist with financial planning for your first-time homebuying!