REGION – Being a first-time homebuyer doesn’t have to be an overwhelming experience. “A lot of clients come in with all these assumptions,” said Michael Douthwaite, a mortgage loan officer with Zillow Home Loans.
“But it’s not that complicated, especially if you have that educational moment on just what steps to expect.” Douthwaite advises buyers to ask a lot of questions, and not to hesitate to request more information if something isn’t clear.
An important factor to keep in mind when preparing to buy a home is that you cannot finance the down payment. Douthwaite explained, “Unless it’s coming from a secured loan like a home equity loan, you can’t take out a loan for the down payment. You can’t use a credit card, or anything like that.”
The exception is borrowing money from a 401(k), but Douthwaite warns that there are “lots of rules to follow, and consequences for tapping those funds…be sure to talk to a tax advisor.”
Additionally, there are several types of low-interest or forgivable loans and grants that are available for qualified first-time buyers.
One of the biggest challenges when purchasing a new home can be saving enough for a down payment. Twenty percent of the purchase price has long been considered the average down payment, but according to the National Association of Realtors (NAR), the median down payment among homebuyers in 2023 was 15 percent. However, the lower the down payment, the higher the loan amount, meaning higher monthly payments, and more interest paid over the course of the loan.
Douthwaite suggests buyers will want to get preapproved for a mortgage loan prior to starting their search. In competitive markets, preapproval is especially important. “We recommend having a conversation with financing, either at or before the first viewing, or right after the first viewing,’’ noted Douthwaite.
Buyers can become discouraged if they don’t find a home quickly, or if they miss out on a home they wanted, but Douthwaite wants to remind buyers that many lender preapprovals are good for 90 days. “You don’t have to reapply again during that period. If one home doesn’t work out, you have our blessings to hit the ground running for the next one.”
Part of the financial review process is to calculate an affordable monthly mortgage payment. Experts advise that a mortgage payment should be no more than ome-third of your income. Utilizing online tools to estimate monthly costs or talking to a lending professional will help first-time buyers create a personalized budget. One such tool is BuyAbility, created by Zillow Home Loans to offer buyers an accurate, personalized estimate of the home price and monthly payments.
Data provided by Zillow Group.