Buying a home is a huge responsibility and a great investment in oneself. Instead of making someone else wealthy, we can take those same amounts you pay in rent each month towards your mortgage. This way you are building equity. Investopedia explains that home equity represents one of the largest sources of net worth for most investors. Home equity can be borrowed against through a home equity loan or home equity line of credit (HELOC). There are tax benefits as well as credit worthiness benefits.
First things first, do you know your credit score??? This score will either propel you or stop you dead in your tracks. Nowadays, you can qualify for a FHA, VA or USDA loan with just above 640. Conventional loans have higher score requirements, and down payments. However, we won't discuss conventional loans for now. These loans, with the exception of the USDA (which requires no down payment), will require a 3% down payment.
3%?? Yes, 3% of the purchase price. For example, if you are buying a $100, 000 house, you need to have $3,000 at closing. In addition, it is good to have earnest money. Although not required for an offer submission, it sure makes your offer look that much better. Do you have to give that to the seller?? No, it is debited from the purchase price at closing.
They accepted your offer!!! Whooohooo!!! This is where time is of the essence! You should receive a good faith estimate showing closing costs and what is due on closing day. Closing costs? Yes! Closing costs....all the people you need to pay for this wonderful transaction mostly the government with taxes and fees. It can add up to a significant amount meaning thousands of dollars. What?!?! I don't have that. I just started my job a year ago, and I am paying student loans and other debt. I may have an option for you...SHIP or Florida Housing Finance corporation can be of service. Currently, SHIP will give you $7,000 towards closing costs with attendance to a first time home buyer course, and using a lender who provided SHIP. This non interest bearing loan disappears after 9 years. It has income limits, and if you make too much money for SHIP, you may want to consider FHFC, and they will give you $10,000 towards your down payment and closing due back to them upon resale of the home or payoff. Just some options to consider.
Not only will you need the earnest money deposited within the time frame stated on the offer, but now we need to pay for inspections and appraisals. Home Inspections run about $175, WDO (wood destroying organism) inspections run from $75-$125 depending on the company, and appraisals about $450. After careful addition, it looks like another $800. $800?!?! Yes, Freddy First Time Home Buyer, it is worth the $800 for piece of mind. Isn't it? Most of which has to be done within 15days!
After inspections, you find that your almost new home was never lunch for some wood hungry organisms. Here comes the good part....count down to closing!! Pardon, my sarcasm, this will seem like the longest days of your life although it can be as short as a few weeks. In between requests from the underwriters for last bank statements and pay stubs or anything else they can imagine. You wait, and wait, and fulfill orders, and wait...
Closing day comes! You sign your life away, and give them whatever is due. You are a new home owner! Congratulations....sound simple enough? Well, what are you waiting for?!?!? Check your credit and your finances today! Call a REALTOR tomorrow!
