My First Home

With the help of these first-time home buying programs, you too can have the American dream

Federal Housing administration loan and raise a 10% down payment.

The FHA usually has relatively low income requirements, but different states impose their own limits on how much you can actually borrow. Most FHA loans require only 3% to 5% down. One of the most popular ones for first-time home buyers is the 203B, which is used for home repairs and renovations. The amount of the loan is based on the price of the home plus its renovation costs. For example, if a home costs $200,000 and it needs $50,000 in repairs and upgrades, the amount of the loan will be based on $250,000. Many HUD property owners take advantage of the 203B loan. It’s also popular with home buyers looking to refinance with past credit problems or little or no credit history.

James Browne, a home mortgage consultant with Wells Fargo Home Mortgage, says many first-time home buyers don’t take the home buying process as seriously as they should. He says that homeownership education is crucial to helping potential homeowners understand the financial aspects of buying and owning a home. For example, many would-be homeowners don’t save enough money for home repairs and other emergencies before they secure their home, says Browne. The Gordons were smart and got their new home thoroughly inspected prior to its sale. This was key in helping them figure out how much additional money they’d need to put into the house to really make it livable. “It is important to be prepared for catastrophic incidents [that] may take large amounts of money [to resolve],” says Browne.

Browne also emphasizes that first-time home buyers should know their credit score and debt-to-income ratio. He says a score of 680 to 740 is a good range to be in when looking to buy. “Anybody who has a credit score of 500 is in what I call an emergency room state, [which is] basically a n
ear death position with their credit.” He says prospective home buyers should obtain their credit reports about six months before deciding on a property. This gives them time to review the report, fix any problems they may discover, and then improve their debt payments to build up their overall credit rating. A credit score above 740 is considered excellent.

Browne also cautions new buyers to make certain their debt-to-income ratio allows them to afford the kind of home they want. His advice is to figure out what the total monthly expenses will be in the new home before you buy it to make sure you aren’t overextending yourself.

FIVE STEPS TO TAKE BEFORE BUYING A HOME
According to Sonia Fears, a Wells Fargo home mortgage consultant, there are five basic steps potential homeowners should take when preparing to buy a home.

Attend home buying seminars. “These are generally published in newspapers and are put on by real estate agents, lending companies, and inspectors — all people who provide a level of expertise,” says Fears. You’ll pick up information at these seminars that will help you make important decisions, including how

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