We LOVE working with first-time home buyers. There is simply nothing more exciting than finally getting the opportunity to finally move into your own place. However, as a first-timer, you may feel overwhelmed by what can sometimes be a confusing process. With spring-time already here, we are so excited to begin the home-buying season, so let’s get things started!
We have worked in the North Houston area for a long time, and it’s our goal to help our clients learn as much, or as little, about the ins and outs of this process as possible. Today, we’re sharing a few of the most common questions first-time buyers ask, so you feel prepared to start your journey!
What exactly is a mortgage?
Only about 10% of buyers purchase their homes with all cash. All other buyers must borrow some money to pay for their home, which primarily comes in the form of a mortgage, which is a special type of loan. Mortgages offer a few benefits, a few of which include:
- Lower Interest Rates- Under 3% annually on average.
- Extended Repayment Periods- This allows you to pay off your loan over a long period of time. The average repayment time is around 30-40 years.
- Option for Fixed Rates- While you have the option for adjustable monthly rates, most people tend to choose a fixed rate, so their monthly payment stays the same throughout their loan’s term.
Simply put, the amount one pays out of pocket for their own home is considered the down payment. The mortgage is there to help pay for what is left over.
How much should my down payment be?
You’ve probably heard that you need to put 20% down on a house. While this is great, it is definitely not required in order to purchase a home. It turns out, the average down payment on a home is only 6% of the home’s total price. This is much more manageable!
If you’d prefer to make an even lower payment, you can look into loan programs that allow you to put down less than 6%. For example, USDA and VA loans require a 0% down payment, and FHA loans require 3.5% down. Whatever your situation, we can find an option that works for you!
Is my credit score good enough?
For the majority of average loan programs, you’re required to have a credit score of at least 620 to qualify as a first-time buyer. Typically, loans that grant you a smaller mortgage rate (and thus allow you a bigger house budget) require a higher score. If you have what is considered an “excellent” score of 720 or more, you are likely to be approved for almost any loan program. For those reasons, it will be worth your while to work on raising your credit score before buying your first home.