Buying a home is not an easy process; most first time home buyers face numerous obstacles when they set out to find a home. These obstacles usually arise due to a lack of knowledge and preparation for this life changing decision. One simply cannot get up one day and decide to buy a home; it’s a goal one has to gradually work towards.
The most common obstacles you are likely to encounter as a first time home buyer are as follows and you should take measures to overcome them beforehand.
Finding the down payment is the first obstacle. With the exception of some loans that aren’t available to everyone, all normal loans require a down payments that can be anywhere from 3.5% of the sale price to 10%. However as a first time home buyer there are often government funded programs and grants available to help people with the down payment. Inquiring about these with a loan specialist who can guide you into choosing is a great way to overcome this obstacle.
Having the right FICO score is another issue for first time homebuyers. Your real estate agent will tell you that the magic number that gets you a conventional loan is 720 to get a good interest rate. It can dip as low as 620 but that would certainly tax first time buyers in terms of the total amount you’ll be paying over the years. Most people have dings on their credit and while you may not be able to get the best rate out there, the more important things is you get an approval for an amount you’re financially comfortable paying each month.
Qualifying for lender ratios is the third obstacle that first time buyers face. Lenders at least expect a front-end ratio of 33%. This basically means that your monthly mortgage payments, insurance and taxes (PITI) cannot exceed 33% of your income. This restricts your affordability considerably, so you need to plan your purchase accordingly.
The back-end ratio on the other hand is trickier. It adds the PITI payments with all other monthly dept payments. The percentage of the total amount should fall between 41 and 50% depending on the type of lender and loan.
If you are looking to settle down in settle down in Central Phoenix, Arizona, get in touch with us and we will guide you in getting the right financing and home.