Author: Ahmad Azizi, Branch Manager at Option Funding, Inc.

Taking out a mortgage to buy a home for the first time can be as scary as it is exciting. After all, there are so many unknowns – and it is likely to be the biggest investment you have made in your life thus far. While you navigate these waters and determine what it is you are looking for in your future home, there are a few benefits of a first time home buyer that you will not want to miss.

So, who is considered a first time homebuyer? It can depend, but it is usually defined as someone who has never owned a home before. But that’s not all. First time homebuyers can typically be considered as those who have not owned (or co-owned) their principal place of residence anytime within the last three years.

What are the Benefits of a First Time Home Buyer?

Below are seven benefits of a first time home buyer that you won’t want to miss out on!

1. Take Advantage of First Time Home Buyer Programs

When you are a first time home buyer, you get to take advantage of some really helpful programs. This includes being able to get approved for a loan if you have a lower credit score or even less money to put down as a down payment – two things that often prevent many people from becoming homeowners.

Purchasing a home is not something everyone can do easily. Yet, everyone should have the opportunity. With these programs, one of the benefits of a first time home buyer is the ability to take advantage of owning a home by getting a little extra help along the way.

2. More Lenient Qualification Requirements

While lenient qualification requirements come with many first time home buyer programs, it is important to focus on their role in helping individuals purchase homes. Having a good or excellent credit score is often necessary to secure a mortgage. However, not everyone has been able to maintain their credit over the years – and this can easily lead to a denied application.

Another common thing that lenders take into consideration is the debt-to-income (DTI) ratio of the buyer. This is the percentage that tells lenders how much money you will spend on paying off debts versus the amount of money you have coming in for income. Many mortgage companies require a certain DTI in order to qualify for a loan, but first time home buyers can take advantage of more relaxed requirements when it comes to this.

3. Down Payment Assistance

As mentioned above, coming up with large amounts of money for down payments can be tough, too – and not something everyone can do. One of the benefits of a first time home buyer is that you may not have to worry about it. There are programs available that may provide you with grants or forgivable loans that provide you with down payment assistance. They may even cover your closing costs too.

Keep in mind that there are many different programs that are offered by local and state housing authorities. Each program has a different set of qualifications, so if you don’t qualify for one, you may qualify for another – so always do your due diligence.

4. No More Rent Payments

Rent payments can add up over the years – and tenants are left with nothing to show for all they have spent. Not to mention that in many places, landlords have the opportunity to raise the rent each year, and they can choose not to re-rent the space when the lease is up. As a result, tenants are often left without any stability for the future.

When buying a new home as a first time home buyer, you gain access to monthly mortgage payments that are predictable. And each payment you make is going to go toward building the equity in a home that is yours.

5. Owning an Appreciating Investment

A home’s value will change over time. If you invest in a property as a first time home buyer, there is a good chance that your home will be worth more in the future. Everything you put into your home can boost its value – which means the money is never spent for nothing (much like a rent payment).

Without opportunities such as first time home buyer programs, many new homeowners will never have the ability to hold such an asset.

6. Protection For Your Future

Getting older and not having a place of your own to call home can make you a bit nervous. And rising rents combined with near-stagnant social security income once you retire can leave the future with a lot of unknowns.

One of the best benefits of being a first time home buyer is that it’s an investment in your future. As you own it, it can begin to appreciate over time. Then, as you get older and have more invested in the property, it can be a great benefit. You may even pay it off and no longer have a mortgage payment which will be great news. Or, should you decide to downsize, selling your home that has appreciated will bring you a great reward. This additional money can become a nest egg for your future.

7. Potential Tax Benefits

The IRS offers tax deductions for those who own their own home. In other words, it gives an incentive for individuals – and first time home buyers – to take that step. The type of tax deduction, as well as how much the deduction is, will vary. The key is to know that when you invest in a home, you are potentially having a positive impact on your tax return which can result in savings each year. 

Think about how this can add up over time!

Reap the Benefits of Being a First Time Home Buyer

It is not uncommon for some individuals to think that they can’t become homeowners for one reason or another. The more you can learn about the options available and the benefits of being a first time home buyer, the greater chance of success you will have when it comes to getting the new house keys in your hand. 

There are so many opportunities for those that have not previously owned or co-owned their home. At Option Funding Inc in Westlake Village, we can provide you with loans for down payments, lower down payments, more lenient debt requirements, and even lower credit scores. Call us today and see what we can do for you!

Purchasing your first home and taking out a mortgage option is perhaps the biggest investment you have made in your life thus far – and you don’t want to mess it up. But getting caught up in finding the perfect home and dreaming about what life would look like in it is so easy. This leads to many costly mistakes, and you’ll wish that you followed the typical do’s and don’ts when buying a home for the first time.

Do’s and Don’ts When Buying a Home

To help you successfully get those keys in hand at the closing, here are a few do’s and don’ts you should follow, especially if you’re new to the home buying market.

1. DO Get Approved For a Mortgage Before You Make an Offer

The market in many areas is still really busy, with many sellers getting multiple offers. So, without a pre-approval, you are too great of a risk for the seller. There is no guarantee that you will be given a chance – especially if there are other offers from either cash buyers or those who have been pre-approved by a lender.

Apply for your mortgage before you make an offer to get the best chance of securing your new home.

2. DON’T Apply With Just One Lender

There are so many lenders and mortgage experts out there, and they don’t all offer you the same thing. Just as you wouldn’t likely run out and buy a car without shopping around, you shouldn’t do that with a mortgage – which is an even greater investment.

Look into what different lenders have to offer and, for those that look ideal, apply with them. Never settle for just one.

3. DO Work with a Mortgage Consultant

Applying for a mortgage can be a time-consuming project, especially gathering all the specific loan process documentation required. And since you don’t want to apply with just one lender, going through this process over and over can be tedious and rather exhausting. The worst part is that you never know whether the lender is likely to approve you, what their rates tend to be, and so forth.

You can make your life so much easier when you work with a mortgage consultant. This is a great way to have access to those who have extensive knowledge in the field and a network of potential lenders. Based on your circumstances, they can help you determine the best loan programs and/or lenders to meet your needs – without wasting your time.

4. DON’T Spend Every Penny

The more money you have for a down payment, the smaller the mortgage you will need to take out. Unfortunately, coming up with a large sum down payment can be challenging. Many first-time homebuyers try to take everything they have and add it to this payment, leaving them with absolutely no emergency fund. As helpful as a large down payment may be, becoming this vulnerable can be dangerous.

Your down payment should be about 20% when buying a new home, but it doesn’t have to be. Depending on the loan programs you qualify for, you may find something that will allow you to purchase with no money down or even less than 5% down.

Save the money you can for your down payment without allowing yourself to go into debt – and without eating up everything you have. If you can come up with a large down payment, fantastic. If you need to find a loan program that allows much less, then that is ok, too. You don’t want to kick off life in your new home without having anything extra set aside.

5. DO Take Care of Your Credit

Speaking of not going into debt, your credit is incredibly important to lenders. You need to ensure that your credit is intact and in a good range before you try to buy a house. Many lenders have certain minimum requirements for the credit score and debt-to-income ratio in order to be approved for a mortgage.

Check your credit report to get an idea of where you currently stand. You can reach out to the major credit reporting agencies directly, such as TransUnion, Experian, or Equifax. Or, you can use a credit report service to get an idea of your standing. Checking your own score like this will not impact your credit.

Keep an eye out for any negative account information, like late or missed payments. This can have a negative impact. Anything that is older than seven years old, accounts you do not recognize, those that have been listed more than once, and the like need to be addressed.

Take steps to clear up your credit report in order to help boost your score and better your chances of getting approved for a loan.

6. DON’T Apply For Credit Before the Loan Funds

Before your loan has been funded is not the time to apply for credit. That means don’t try to open a line of credit, apply for credit cards, buy a car or a boat, etc., after you have received a pre-approval and before the transaction is finalized and closed. This needs to be a dormant period for your credit because you don’t want anything to change unless it is for the better.

See, your lender approved your loan based on your credit score and your debt-to-income ratio. Anytime you apply for credit, your score will drop a couple of points, and your ratio can increase. Before the closing, your lender will re-run your credit to confirm everything is still good. Any new changes could increase your rate or even cost you the mortgage.

7. DO Stick to What You Can Afford

Who doesn’t want a huge, beautiful house with all the perks and luxurious add-ons? Everyone has a price range that they can comfortably afford – and that is the range in which you need to stick to when you buy a house.

Since there is no reason why you should get your hopes up for a house you can’t afford, it is important to have an idea of what can fit into your budget. And, if possible, focus on the lower end of that range. Using a mortgage calculator can help you to determine just how much home you can afford.

Take Your Time

When it comes to buying a home for the first time, it is important that you don’t rush into things but rather take your time. There are many do’s and don’ts when buying a home that you will want to follow so that the entire process flows as smoothly as you envisioned it.

Visit Option Funding Inc in Westlake Village for more information about home loan options, mortgages, and homebuying tips.