The home buying process is one that is full of decisions. Do you want a house or a condo? Should you shop for a new or an existing home?
If you settle on a newly-built home, a whole new set of decisions enters the picture.
Before you hop in the car to visit new home communities, however, there are a few things you should do to protect yourself during the purchase process.
Lay the foundation properly, and you’ll make it to closing with nary a hitch.
1. Get Clear on your Finances
Walking into a new-home purchase without knowing how much you can afford to spend on a house puts you at the mercy of the builder and/or his lender.
Since buying this home may be the biggest financial decision of your life, you owe it to yourself to go into the process with as much knowledge as possible.
See a lender before viewing even one home. Find out how much you can spend and then stick to that price range when shopping for a home.
Then, compare lender quotes before making a final commitment. Sometimes the builder’s preferred lender offers the best deal – but not always. Get the cost of each loan from every lender you speak with.
Find more information on how to shop for a mortgage from the Federal Trade Commission.
2. Choose a Community
New home communities offer various amenities. Many are managed by a homeowners association, which takes on some of the outdoor maintenance chores, such as snow removal.
But, they also come with an added monthly fee, so consider the fee’s impact on your budget.
Then, make a list of features you desire in a new community. Some of the criteria you may choose include:
- Proximity to schools.
- Outdoor recreational opportunities
- An area with lots of children or, on the other hand, few kids.
- Your commute time to work.
Once you know your budget, and what you’re looking for in a neighborhood, it’s easier to narrow down where to shop.
3. Research the Builder
There are a number of ways to do this, but starting with the Better Business Bureau is a good first step. Check for complaints against the builder and the company.
Ask your agent what he or she knows about the builder and the homes he/she builds.
Find out what other communities the builder has helped developed and visit one or two of them.
Stop and chat with any residents you come across to find out if there are any common problems with the home.
When you visit the communities on your list you’ll be greeted by a real estate agent. If you find a home you like it’s only natural to assume the whole process will be streamlined if you use this agent for the purchase.
Not a wise decision, and here’s why: that agent represents the builder.
Just as you wouldn’t dream of hiring your soon-to-be former spouse’s attorney in divorce proceedings, so should you never use the builder’s agent in a new-home purchase.
Buyer’s representation costs you nothing – the seller (the builder in the case of new homes) pays all real estate fees. So there is really no reason not to hire your own representation for such an important investment.
Ask the builder for a walk-through of the new-home buying process—find out the schedule, the number of inspections that will be performed and get a features sheet list.
Arm yourself with as much information as possible and the process will go smoothly.
Stop the struggle with saving for a down payment to purchase a new home
Despite having decent credit, a good job and the ability to pay for a home every month, the dream of buying a home is somewhat elusive for those with little to no cash to put down.
This is why our younger generation isn’t buying homes at the rate that previous generations did.
With student loan debt weighing them down, there is little money left at the end of the month to set aside for the down payment on a home.
And, sadly, most lenders require you to have some skin in the game before they’ll lend you money for that home.
Thankfully, there is help – both state and municipal agencies offer down payment and closing cost assistance to home buyers across the country.
While it will take some work on your part, you can get around saving that huge chunk of cash known as the down payment.
Get help with down payment assistance programs
Down payment assistance comes in the forms of grants (that don’t have to be repaid) and loans — some at no interest or very low interest and some don’t have to be repaid until you sell the home.
State Housing Finance Agencies (HFA) offer many opportunities so check into yours first. You can find a list online at ncsha.org.
Counties and cities also offer down payment assistance programs as do certain non-profit agencies and employers. In fact, some of the larger labor unions, such as the Culinary Workers Union, offer assistance.
Find state and local government programs on HUD’s website, here.
No down payment loans
1. If you are a current member of the military, a veteran or a surviving spouse, look into the VA Loan.
The United States Department of Veterans Affairs doesn’t actually grant loans; they guarantee the repayment of a portion of the loan should the borrower default.
The loan is granted by a private lender but not all lenders participate in the program so you may have to shop around for one. We are happy to refer you to a lender that participates
The VA-backed mortgage requires no down payment and there is no requirement to purchase private mortgage insurance, which will make your monthly payment lower than with a conventional loan.
There is, however, a funding fee but it can be wrapped into the loan amount, so you won’t have to come out-of-pocket for it.
2. The United States Department of Agriculture (USDA) offers the Rural Development home loan program which also requires no down payment.
They offer two different loan programs. The first is very much like the VA loan in that it offers the lender a government-backed guarantee.
The second program is a direct loan from the USDA and it’s for low-income borrowers.
These loans are for homes in rural areas and you can learn if a home you are interested in qualifies by using the USDA website’s eligibility tool.
Low down payment loans
Yes, FHA is popular for its low down-payment requirement, but when they changed the mortgage insurance requirement, the loan program became a lot less popular.
Today, the Mortgage Insurance Premium for the FHA loan sticks with it for the life of the loan.
If you need a low-down payment loan, however, this may be your program of choice. You’ll pay either 3.5 or 10 percent of the loan amount, depending on your credit score and lender requirements.
Fannie Mae and Freddy Mac
The HomeReady® loan from Fannie Mae actually offers a lower down payment requirement than the FHA program – 3 percent. You will also have the option of cancelling the PMI when your equity in the home reaches 20 percent.
This loan is best for low-to-moderate income borrowers with credit scores of 680 or more. You do not need to be a first-time home buyer to qualify.
Home Possible®, Freddie Mac’s low-down payment program, offers down payment options as low as 3 percent. Learn more about this program online at freddiemac.com.
We are happy to share with you our information on no-to-low down payment loans. Give us a call or visit socalhomes4u.com.