The process involved with first time home purchases can get quite overwhelming, giving some buyers the impression that the financial decisions are rapidly spinning out of control.  When it comes to real estate and real estate loans, most people don’t have a lot of experience or knowledge about the process but in all actuality, buying a home is actually a simple process.  All you need to do is understand the basics and that will help to alleviate a lot of the worry about your first-time home purchase.

Probably the most worrisome part for those involved in a first-time home purchase transaction is the financing of the property because there are so many different factors involved. One such factor is; How are we going to pay for this home? Or can we pay for this home? What's important for the buyers to remember is the fact that if they managed their previous housing expenses in a satisfactory manner (this is to be expected since they are now looking to purchase), then that is the point from which they can begin to eliminate things to worry about. In other words, control what is controllable first, and then go from there. We'll assume then that earnings are satisfactory.

Another question which sometimes create some uncertainty is; Do I (we) have enough of a down payment to make this purchase? What if we don't have enough money? This question is important to consider by the buyers in a first time home purchase, because the general feeling about home purchases is "you never have enough of a down payment". Most of us would rather make the purchase with our own cash resources and not owe the bank a dime, but unfortunately, that is unrealistic so the next best thing is to have sufficient enough of a down payment to satisfy the lender's requirements.

Since many lenders issue loans insured by the Federal Housing Administration (FHA), and the FHA requires a minimum down payment of 3.5% of the purchase price or the appraised value (whichever is less), this should be a worry that can also be eliminated simply because it is the FHA required down payment is the lowest on the market (except for VA guaranteed loans which are restricted to veterans of the Armed Services and their spouses). When  prospective purchasers who have managed their household expenses in a satisfactory enough manner to believe that they could begin to look for a home of their own, it is reasonable to assume that they have considered the down payment requirement and as such may have saved or have access to the FHA minimum required down payment. Assuming that there is enough of a down payment, this worry can be eliminated from the list.

Let us make a few additional assumptions here; Based upon the first qualification (satisfactory household expense management) which encompasses payment of all expenses associated with managing a household, e.g. rent, utilities, phone, cable, insurance (auto, personal and life), kids (if any), credit cards, auto loans, etc.; It is not a far reach to assume also that the credit report will reflect positively enough to be approved by a lender, so the buyers in our first time home purchase transaction, having demonstrated thus far that they have met certain responsibilities in a satisfactory manner, the credit report may be another item of worry that can be eliminated from the list.

Although there is no way of knowing what's going to show up on the lender's credit report, you can feel pretty confident that it won't be an issue, especially if our buyers had previously requested their free copies fro the credit bureaus. This is something we would expect them to do based on prior satisfactory actions. The thre most important requirements of buyers in a home purchase transaction, whether it is a first time home purchase or not are sufficient enough earnings to support the repayment of the mortgage loan, enough of a down payment to satisfy the lender's Loan-to-Value (LTV) ratio requirements, and a good enough credit profile to support the lender's trustworthiness (that  a buyer will voluntarily repay the loan in accordance with the mortgage terms) requirements.

These are areas that can be controlled by the buyers. When the transactions are first time home purchases,  buyers' qualifications are documented a little more thoroughly simply because there is no track record (experience) of they having dealt with the expenses or the maintenance, repairs, or utilities in a complete house as opposed to just a rental. Having said that, the buyers in a first time home purchase transaction must always be aware of what the lender will expect of them and the lenders must certainly know what the buyers expect of them, because the lender will be responsible to take care of everything about the transaction that the buyer cannot control, e.g. property evaluation, loan terms, market rates, title reports and surveys (in many states outside of NY), process, underwrite, approve and close the loan. Being aware of the responsibilities of the respective parties to each other helps to alleviate most of the worry in first time home purchases transactions.

   

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