Introduction
Buying a house for the first time is a dream-come-true for most individuals. However, considering the amount of money involved, coming up with the full amount can be next to impossible. This is where, first time home buyer credit can really make a difference while trying to buy a dream house. Below are some tips to consider, as you look for financing from lending institutions:
Step 1
Pay Off Your Debt
In order for your first time home buyer credit to rank highly, you need to settle all outstanding debt. Most first time home buyers focus a lot of energy into saving money for a down payment. However, if you have any outstanding credit-card debt and other high-interest consumer debt, you would rather utilize that money to settle those debts. Additionally, credit card debt can be expensive and will limit your ability to save money. Consumer debt will also limit the amount of money you can borrow from lending institutions. This is because mortgage lenders will take into account your total monthly debt service, which should not exceed roughly 40% of gross income.
Types of Loans
In paying off first time home buyer credit, the method and amount of interest pegged to the loan can make a significant difference in your ability to service a mortgage. There are three basic types of loans: fixed-interest, adjustable-interest and interest-only loans. With a fixed-interest loan, the interest amount remains constant throughout the life of the loan, whereas an adjustable-interest rate fluctuates over the years. An interest-only loan allows you to pay back the interest solely, for the first few years of the loan.
Step 2
How Much Can You Afford
Before you start looking for first time home buyer credit, you need to consider you much you can actually afford to service the loan. As a rule of thumb, this amount should not exceed 28% of your gross annual income.
Your Credit Score
Most lenders will consider your credit score, as you apply for first time home buyer credit. If you have a low score, do not fret. This is an alternative known as Federal Housing Administration (FHA) loans, which provide loans with more lenient credit criteria.
Tips
Down-Payment Assistance Programs
Coming up with a down payment can play a huge role in accessing first time home buyer credit. The federal government has made it a priority to assist low and moderate income families to buy houses. Each year, the government distributes money through the department of Housing and Urban Development (HUD), which caters for down payment assistance programs.
Independent Home Inspections
Home buyers face bigger challenges when buying a house, than accessing first time home buyer credit; they also need to consider the physical state of the property. It is always advisable to use the services of an independent home inspector, while buying a house. Most sellers will not want to divulge information on any problems their house may have, in a bid to get a better price for it. However, buyers who qualify for FHA loans will automatically be provided with the services of a government inspector.
