Buying your first home is a daunting experience. But, with the right financial tools, you can make it work. The key to any good home purchase is living within your means and limiting the debt you take on. So before shopping for a mortgage, make sure to do your research and find out which options fit best with your individual needs. An excellent way to start is by conducting a financial assessment. A review of your debt, assets, and credit report will help you understand where you stand financially. Also, make sure to talk to your lender about how much you can afford in a home. Their professional advice will help you make the best decision for yourself. Here a few creative financing options to help you buy your first home
Get a Seller-Assist Mortgage
The seller-assist mortgage is what most first-time homebuyers use to buy their new home. Most sellers want to take their money out of the sale as soon as possible, so they offer a low-interest rate and a few key terms to encourage buyers to close on the house quickly. The seller-assist mortgage originated when banks wanted sellers of homes to move fast. A recent trend is renter-friendly features that attract buyers from all over the country. Recently, more lenders are offering these types of mortgages.
Government Issued Loan
A government-issued loan is an ideal solution for many first-time homebuyers. For this option, you need to qualify based on income and assets, but a government agency will back the loan with your city or state’s tax revenues. The advantage of this type of loan is that it will always be available to you because the program never runs out of funding. Such loans include the VA loan, the FHA loan, and the USDA Loans in Florida. This can save you money because interest rates will be lower than a traditional mortgage with a fixed rate.
Home-Equity Line Of Credit (HELOC)
A home equity line of credit is an unsecured loan used to finance home improvements. It’s like a short-term loan; you pay interest on the money you borrow, and you don’t need good credit to qualify. These loans are available from major banks and credit unions. Most HELOCs allow you to borrow up to 80% of the value of your home and last from 5-25 years. The loans are perfect for homebuyers who don’t want to make a lump-sum payment for a new roof or a kitchen remodel. A HELOC is also great for paying off any high-interest credit card debt since most credit cards have an interest rate of 18% or more.
The final option is seller financing. This option involves the seller of your home offering to pay for part of the purchase price. The seller-financing offer could be as little as 5% of the sales price or more than 50%. These deals are not popular with buyers because they often have low-interest rates and variable sales prices. Sellers are interested in getting their money out, so they frequently change the interest rate and payment schedule after negotiations open and close on a house. The best way to protect yourself is by getting the agreement in writing than making sure you understand the terms before signing the contract.
If you want the stability and peace of mind that a traditional loan offers, you can still find them. But the bank will want to see paperwork proving your financial responsibility. There are two types of conventional loans available: fixed-rate and adjustable-rate mortgages (ARMs). A fixed-rate mortgage is a loan with an interest rate that doesn’t change during the life of the loan. Depending on the interest rate, it can be cheaper than an ARM. The drawback of a fixed-rate mortgage is that you will pay the same amount each month for the life of the loan.
Crowdfunding sites like GoFundMe and Kickstarter can help you finance the down payment on a house. Unlike traditional crowdfunding, where a group of people donates money to an entrepreneur or inventor to get their project up and running, these sites allow individuals to get the funds they need for any purpose. For example, some people use crowdfunding sites to raise money for relocation expenses after losing a job. Others use it for medical expenses that insurance won’t cover. Some need some financial help to buy their first home.
Hard money is also known as private money or non-bank financing. It’s easy to find hard money lenders because of the Internet and because many investors can get a better return on their investments through these types of loans. Hard money means that there’s no bank involved in the funding process. The investor will fund the loan out of his pocket, so he gets all the benefits. He can set his terms and rates, and the interest rate is tied only to the risk.
Determining the best way to pay for your first home depends on many factors, including your credit history, income, and employment. Becoming a homeowner is an important goal that requires planning and smart decision-making. To be financially prepared, you should start saving early in life and make sacrifices to build up your savings account. The more money you have saved ahead of time, the less stressful it will be to make those monthly mortgage payments.