Buying a home remains one of the most important investments a person will ever make in his life. Since not all of us have the money to buy a property without taking out a home loan, most home buyers end up spending a lot on the interest rate, insurance, and taxes. What these people don’t know is that there are at least three areas every first time home buyer should pay attention to in order to save money when purchasing a property.
- Credit score. The first thing a home buyer should do before applying for a home loan is to check his credit score and improve it if necessary. Why? Concisely, a borrower with a high credit
score can benefit from a lower interest rate, which will translate into a lower total amount owed to the lender. If a loan applicant with a credit score ranging between 760 and 850 can expect the lowest interest rate, a credit score under 620 will be quoted significantly higher rates. In addition, most creditors reject applicants with a credit score lower than 500.
- Down payment. A minimum down payment of 20 percent of the property value will allow a first time home buyer to avoid paying Private Mortgage Insurance (PMI). A borrower who cannot afford to cover this level of down payment will have to pay PMI, which protects lenders against loss when borrowers default on their loans. Another important point to keep in mind is that a lower down payment will limit the negotiating power of a borrower, who will be charged a higher interest rate.
- Home inspection. Unlike home appraisals, which are typically required by lenders before approving a home loan, home inspections aren’t a requirement. However, a first time home buyer should have an inspection done to ensure that the house is in good condition before signing on the dotted line. Furthermore, experts advise home buyers to insist on a home inspection, especially when the seller is trying to discourage this practice or to rush the selling process.A professional home inspector has a duty to carefully inspect the property and report all the problems he identifies, ranging from the most obvious defects to the smallest issues. How can a home inspection done by a professional help a first time home buyer save money? Simply put, an inspection will provide all the information a buyer needs in order to make an informed decision on the purchase, preventing him from overpaying for the property. Considering this aspect, buying a house without having a home inspection performed is extremely risky.
In addition, a first time home buyer should be aware of the special programs and benefits run by different states. Some programs available in Florida are:
- Individual Retirement Account (IRA) – A first time home buyer is eligible to withdraw $10,000 without penalty. Those with a traditional IRA will have to pay income tax on the amount they withdraw.
- Home Mortgage Interest Deduction – With this program, home buyers can deduct the interest they pay on their mortgages.
- First Time Home Buyer Program – This program offers down payment and closing costs assistance to those who qualify.
- Tax Credit Program – Basically, this program offers first time home buyers some money back, based on the loan amount and interest rate.
By considering all these points, a first time home buyer can easily derive maximum savings out of the home buying process. For more information on how to save as a first time home buyer, contact our experienced and friendly mortgage originators at (904)-389-4635 or use our online form.