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Tips for first-time homebuyers

by Meghann Finn Sepulveda on Dec 4, 2015

If you’re a first-time homebuyer, odds are that you’re part of the Millennial generation … you’re seeking a traditional single-family home … and you have an average income of $61,000, according to U.S. News & World Report.

These buyers face tough competition from investors and cash buyers and tend to have more debt, little savings available for a down-payment and often end up financing the majority of the mortgage.

However, while the market can be challenging for first-time buyers, there are assistance and incentive programs available that can help make the dream of owning a home become a reality.

Know your financial situation

Before shopping for a home, experts recommend taking an important first step in the buying process: know your credit score and the mortgage amount for which you’ll qualify.

“Today’s first-time homebuyers are established professionals who have experienced a life event such as marriage, children or the need for larger space,” said Dustin Gaskey, vice president at Fidelity National Title Agency. “It’s critical that these buyers work with an industry expert such as a lender or realtor to completely understand his or her individual financial situation.”

Mortgage lenders rely on factors such as credit score, credit history, type of credit and the debt amount owed when approving financing. 

Determining your down-payment

While there are a variety of loan options available, most conventional loans require a down-payment of 10 to 20 percent of the total price of the home, although some loans — such as FHA-insured loans — require less, with a minimum down-payment ranging from 3.5 to 5 percent. VA loans require no down-payment.

There are loans available, however, that offer down-payment assistance.

“While these programs can be very attractive to a first-time buyer, they can carry higher interest rates which would not always be beneficial down the road,” said Tom Osselaer, chief financial officer for Homeowners Financial Group. “Lenders need to determine the very best loan program for the prospective buyer’s specific needs.”

Numerous assistance programs

Today many homebuilders are catering to first-time buyers — by doing things like offering incentives, down-payment assistance and/or competitive home-warranty programs — making new construction an attainable option.

While there are several local, county and federal grant and assistance programs available, not all first-time buyers are aware of these options.

For example, the Industrial Develop-ment Authority of the County of Maricopa and the Industrial Development Authority of the City of Phoenix joined together to create the Home in 5 Program which offers up to 4 percent of the loan amount (5 percent for qualified military personnel) toward the down-payment of a home purchase. There is an income limit of $88,340 for all borrowers and a maximum purchase price of $300,000 for those looking to purchase a home in Maricopa County.

The Arizona Housing Finance Authority operating on behalf of the Arizona Department of Housing HOME PLUS Home Loan Program offers a 30-year fixed-rate mortgage with a down-payment assistance grant of 4 to 5 percent of the mortgage amount, depending on the loan-to-value.

“The City of Phoenix Neighborhood Stabilization Program is also an option for people buying homes in established areas of Phoenix and assists with down-payments and closing costs for those with low and moderate income levels,” Osselaer, of Homeowners Financial Group, said. 

The U.S. Department of Housing and Urban Development HUD Good Neighbor Next Door Program is designed for teachers and first-responders such as firefighters and police officers. Buyers must commit to living in the home for 36 months.

“This FHA-backed national program gives 50 percent off the list price of the home to these buyers purchasing a home in a community revitalization area,” Gaskey, of Fidelity National Title Agency, said.

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