FAQ for First-Time Homebuyers
Are you thinking about buying your first home? It’s exciting to look for a space to call your own or to meet the needs of a growing family. Yet, there are lots of factors to consider. Which neighborhood is right for you? How much will you need to save to get started? What if your credit score is less than stellar?
The good news is, there are plenty of ways in which you can set yourself up for success on your journey to a new home. To help first-time homebuyers, here are the answers to some important questions.
What are the benefits of home ownership?
There are many enjoyable and rewarding reasons to own your own home. These include:
Equity. Unlike monthly rent payments, home mortgage payments help you reduce what you owe on your home and build equity (or ownership) in your investment. As your home increases in value and you pay down on what you owe, your equity also grows.
Tax advantages. Homeowners can take tax deductions, such as mortgage interest and property taxes up to certain limits, that are not available to renters. In some cases, buyers may be able to deduct the cost of any points (pre-paid interest) paid when closing the loan. Always check with an expert to find out what applies to you.
Your own space. Whether you’re into craft beer or craft rooms, it’s pretty special to customize your own space to your individual needs. Texas builder Trendmaker Homes offers carefully crafted homes with features like gourmet kitchens, spacious family rooms and spa-like master retreats. With flex and outdoor spaces, you can always find room to do what you love.
How much should I save for a down payment?
Not all mortgages are the same, of course, but a good rule is to aim for 20 percent of the cost of the home you want to purchase. Depending on your loan, a 20 percent down payment may allow you to avoid paying private mortgage insurance (PMI). PMI is a fee charged to you to protect the lender’s investment in case you default on your loan.
Not all loans require a 20 percent down payment. Ask your mortgage lender what type of loan is best for you and if you qualify for assistance. First-time buyers, active service members and veterans may qualify for programs that will lower their up-front costs.
What should my credit score be to buy a new home?
It’s always a good idea to know your credit score before you start the homebuying process.
Higher scores tell lenders you have paid your bills on time and haven’t defaulted on payments. If your score is lower, lenders may see you as a riskier investment and require a higher interest rate. With a low credit score, you could end up paying thousands more over the life of the loan.
Typically, potential homeowners who have credit scores of 720 or above will receive the best interest rates.
If your score is not where you want it, there are steps you can take to improve it:
– Pay down your debt
– Check your credit report and have inaccuracies removed
– Make payments on time every month
– Avoid applying for new loans or credit cards