14 — Say you saw it in The Real Estate Browser of Lynchburg — Volume 10 Number 5 www.LynchburgRealEstateBrowser.com Karen Hall From Your President of The Lynchburg REALTORS® Association DO’S AND DON’TS FOR FIRST-TIME HOMEBUYERS Homeownership is the bedrock of the American dream. For many people, owning their very own home is a major life ambition and motivator for how they lead their professional and personal lives. It can often seem like this goal is impossible to achieve considering the huge toll it takes on one’s bank account, but thankfully that is not the case. To support long-term economic growth, the U.S. government provides a great deal of support for homeowners. By decreasing the risks mortgage lend- ers take on, the government keeps interest rates low. As long as you educate yourself with helpful resources, you’ll be as equipped as the professionals when it comes to avoiding costly mistakes and taking the next step towards homeownership. Now that it’s time to make the leap and buy a home, you’re most likely balancing your excitement with a great deal of jitters. You can breathe easy— we’ve got your concerns covered with our comprehensive Do’s and Don’ts for First-Time Homebuyers. DON’T ONLY GET ONE RATE QUOTE As exhilarating as it can be to hear your first mortgage offer, don’t make the all too common mistake of locking down your first offer. Even if your initial rate quote seems like a great option, there are various other factors to take into consideration such as closing costs and mortgage points. Mortgage interest rates vary based on the lender, so do yourself a favor and apply with numerous lenders. Debra Grog, an agent with Movoto Real Estate, has a great rule of thumb when choosing a mortgage, “When considering your price point, start with the amount of rent you are paying now, not necessarily what the bank/mortgage company says they will loan you.” DO CHECK YOUR CREDIT SCORE TO ENSURE IT IS ACCURATE Your credit score is quite possibly the most important determinant when it comes to being approved for a loan, as well as the first building block to secure a financial foundation for yourself. The first thing lenders will take a look at is your credit history and the greater your history is, the higher your chances are for acquiring a good interest rate. While achieving the highest credit score you’re capable of before applying for a mortgage is prob- ably a given, often times checking for errors isn’t. Even the smallest glitch on your credit report could result in your interest rate skyrocketing, so this is certainly not a step to skim past. A great resource to use is Annual Credit Report, which is the only credit report website that is authorized by the federal government and good news—it’s free! DON’T MAKE A DOWN PAYMENT TOO SMALL You’ve probably heard people mention that you “have” to make a down payment of at least 20%, but today that is far from the truth. The National Association of REALTORS® conducted a study this past year showing that the median down payment for new home buyers was only 6%. While this percentage may not come as much of a shock when assuming what young homebuyers can afford, it may seem surprising that it is even possible to put down as little as 6%. Making a larger down payment is a completely viable option as long as you don’t entirely empty your savings or neglect fac- toring in additional expenses. Just because a loan program allows you to purchase a home with 0% down, that doesn’t mean it is the right financial choice for you. As Michael Nicholas, the director of U.S. Mortgage Sales and Service at BMO Harris Bank, says, “You don’t want to be house-rich and cash-poor—feeling comfortable and confident with the decision you make is the most important factor of all. DO LOOK INTO FIRST-TIME HOMEBUYER PROGRAMS As we touched on earlier, there are dozens of programs created solely for first-time homebuyers just like you. There is no need to put your dream of homeownership on the backburner for decades while you save up every penny. Depending on where you’re located, there are an abundance of pro- grams that offer low down payment loans, closing cost assistance, and reduced interest rates. States all over the country are proud to be offering these plans. In addition, these programs hike up home sales which improves the economy in the long run. There are also federal programs to consider, such as an FHA loan, which is a mortgage insured by the Federal Housing Administration that allows borrowers to make a down payment as little as 3.5%. DON’T GO HOUSE HUNTING PRIOR TO GETTING A MORTGAGE Although it seems like the most appealing and fun way to begin the homebuying process, shopping for a house before a mortgage is one of the big- gest mistakes you can make. If you’re not clear on how much you can borrow, visiting properties will result in just that; a visit. To ensure you’re view- ing homes that are in your price range, begin by reaching out to a mortgage professional and consider getting pre-approved for a loan. This will not only set you apart from other bidders, but give you ease when house hunting. Don’t tease yourself by jumping 10 steps ahead with a home that isn’t realistic for you.