As a first-time homebuyer, you're probably researching houses and making wishlists. However, as a first-time homebuyer, you may also be overwhelmed. There is a lot to learn about mortgages and the home-buying process before getting the keys to your new Chatham County, North Carolina, dream home.
Instead of just hoping you get through the process unscathed, take a little time to ensure you’re not confused and learn about your options. Once you have some knowledge in your back pocket, you'll be more empowered to make the best financial decisions for your future and could also potentially save some money.
What Is a First-time Homebuyer?
Anyone that purchases a primary residence for the first time is considered a first-time homebuyer. However, if you've owned a home in the past, you may still qualify as a first-time homebuyer. The United States Department of Housing and Urban Development (HUD) establishes the criteria regarding other first-time homebuyers:
- You have not owned a principal residence in at least three years.
- If one spouse has owned a home, but the other has not, you can purchase a home together as first-time homebuyers.
- You're a displaced homemaker that only owned a home with a spouse.
- You're a single parent that has only owned a home with a former spouse.
- You owned a principal residence that was not permanently affixed to a permanent foundation following applicable regulations.
- You have only owned a property that did not comply with appropriate state, local, or model building codes, and you can't bring it into compliance for less than the cost of constructing a permanent structure.
First-time Homebuyer: Where To Start
Before you begin searching for your new house, you need to be prepared. You can do a few things to make the process go more smoothly.
- Learn about different types of home loans. There are several loan types available, but most homebuyers use one of the four major loan programs: conventional, FHA, VA, or USDA. Learning a little about these loans ahead of time is the best way to make sure you are making the right financial decisions.
- Know your price range and monthly payment. If you have a household budget, it will be easier to see what can be allocated for your mortgage payment, including principal, interest, taxes, and insurance. Once you know how much you can afford, you can shop for a mortgage and your new home.
- Contact multiple mortgage lenders to find the lowest rate. Often, first-time homebuyers will go with the first lender they speak to, but you could miss thousands of dollars in savings. If you've already done your research on loans and know how much you can afford, it will make this step easier.
- Obtain a mortgage pre-approval. A pre-approval from a lender is essentially a verification of your home-buying budget. Often, sellers will not entertain offers without a pre-approval, so it'll save you the heartache of missing out on your dream home.
Types Of First-Time Home Buyer Programs in North Carolina
There are a variety of first-time homebuyer programs available. Here are just a few ways you can find assistance as a first-time homebuyer:
- Government-backed loans (FHA, VA, USDA) may allow you to secure a loan with a lower down payment or poor credit.
- Down Payment Assistance may be available in the form of loans or grants.
- Tax deductions for homeowners can reduce your tax burden.
- Closing costs - government-sponsored and private programs can assist with the various closing costs (which average 3-6% of the purchase price)
- Good Neighbor Next Door is a federal program for Pre-K - 12th Grade teachers, EMTs, firefighters, and law enforcement officers that offers 50% off select HUD properties
- Fannie May's HomePath® Ready Buyer™ Program allows first-time homebuyers to buy a foreclosed property with a lower down payment and the possibility of up to 3% of closing costs back.