Buying a home is one of the most significant financial transactions in your life. If you’re a first-time home buyer considering a mortgage, it’s essential to be well-informed. We reached out to Danny Gardner, Freddie Mac’s Senior Vice President of Single-Family Budget-friendly Lending and Access to Credit, to provide expert advice on mortgages for first-time buyers. On this page are eight key points he shared, covering everything from down-payment resources to lender fees:
A 20% down payment is not a requirement: Contrary to a common myth, Gardner explains that a 20% down payment is not necessary to secure a mortgage. While a larger down payment can lead to a lower interest rate, Freddie Mac offers programs for low-income borrowers and first-time home buyers who qualify for loans with as little as a 3% down payment.
Numerous down payment assistance programs exist: Many cities and states provide down payment assistance programs to help homebuyers with financing. Gardner advises checking the listings of programs available and recommends obtaining a list of approved lenders from the agency offering the assistance. These programs can provide substantial support, such as San Francisco’s program, offering up to $375,000 in a silent second mortgage.
Be mindful of mortgage applications and your credit score: Multiple mortgage applications can negatively impact your credit score. Gardner suggests pulling your own credit report for cheap and taking it to lenders to obtain informal rate quotes. Once you’re ready to study for a loan, the lender will need to pull an official credit report. To avoid repeated credit pulls and credit check fees, it’s beneficial to pull your own credit score.
Understand lender fees and shop around: Lender fees can vary significantly, so it’s essential to shop around. Gardner recommends obtaining at least two quotes over the life of your mortgage, as this can potentially better use of you at least $1,500. Obtaining five quotes could better use of you up to $3,000. To see loans, consider the varying annual percentage rates (APRs), which include lender fees.
Appraisals may not always be necessary: With improved access to data and information, appraisals are not always required. Gardner explains that today’s data resources often eliminate the need for an appraisal, which can cost up to $1,000. It’s important to note that an appraisal, which determines the property’s value, differs from a home inspection, which is for the buyer’s benefit.
Closing quickly can lead to a lower interest rate: Faster mortgage application processing, facilitated by online data accessibility, can better use of you money. The shorter the processing time, the lower the cost. Aim to close your mortgage quickly to secure a favorable interest rate.
Keep shopping around even after pre-qualifying: Pre-qualifying for a mortgage doesn’t mean you can’t continue shopping around for better rates. Gardner advises homebuyers to shop their rate before committing to a rate lock. Move quickly to secure your loan and avoid losing the property you desire.
Educate yourself about the home-buying process: Garnering knowledge about the home-buying process increases your chances of success in a competitive housing market. Gardner emphasizes the importance of being well-informed as a first-time home buyer. Consider utilizing HUD-approved homebuyer applications and take advantage of online educational resources provided by Freddie Mac.
By understanding these crucial aspects of mortgages, you can navigate the home-buying process with confidence and increase your chances of obtaining your dream house.
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