First-Time Homebuyer Tips
Being a first-time homebuyer is an exciting adventure for potential new homeowners. As when embarking on any new journey, without some guidance, the excitement may start to churn some feelings of unease. Hero Loan is proud to provide homebuying tips to help first-time homeowners who are active military service members or Veterans navigate some of the features that are unique to purchasing a house with a loan guaranteed by the U.S. Department of Veterans Affairs.
General First-Time Homebuyer Tips
Buying a new home for the first time is a serious endeavor with considerable costs. As such, we’ve compiled some first-time homebuyers tips to consider:
- Check your credit score. For VA loans, a credit score of 620 or higher is necessary when looking to purchase a home. There are several ways that service members and veterans can boost their credit score if needed. Check your credit score to see where you stand.
- Set a budget. You can use a mortgage calculator to determine the interest rate on a loan over a given term. You will want to know your debt-to-income ratio. Housing expenses should not exceed more than 28% of your total monthly income. There will be other costs to consider as well like utilities, property taxes, interest rates and homeowners association fees. Some states exempt veterans with disabilities from paying property taxes at all. Also, factor in how unexpected expenses and unplanned spending can detract from your monthly income. It is advisable to create an emergency fund with three to six months’ worth of living expenses saved.
- Save for a down payment. Even without a VA loan, it is possible for first-time homebuyers to qualify for a loan without a down payment. However, to offset the risk associated with that, private lenders often require first-time homebuyers to purchase private mortgage insurance (PMI). Although purchasing a home with a VA loan exempts buyers from needing to pay a PMI, it can affect other costs down the road. See more information on funding fees on a VA loan below.
- Vet the neighborhood. Be aware of crime rates, school quality and neighborhood amenities. Websites like zillow.com can give you an idea on housing prices and neighborhood amenities. There are also sites that can give you statistics on crime rates and quality school districts. Take a drive through where you might be putting down roots. Look at the houses, talk to your potential neighbors and ask yourself: Can I see myself (and my family) living here for the next 10 plus years?
Unique Tips When Purchasing a Home with a VA Loan
A VA loan offers veterans several unique features they will want to consider taking advantage of when buying their first home. The VA loan program was designed to offer long-term financing to eligible American veterans and service members or their surviving spouses (provided they do not remarry). A VA loan is federally backed, which makes it less risky for lenders, allowing them to offer more favorable terms than traditional home loans. There are still some fees and costs to be aware of, and some constraints to keep in mind.
- No down payment necessary. One of the perks for a first-time homebuyer is that using a VA loan to purchase a home can be done with no down payment. Often when a home loan is purchased with no down payment or with a down payment of less than 20%, the homeowner must obtain private mortgage insurance (PMI). PMIs can range from 2–5% on the total loan amount. Because the federal government guarantees a portion of the loan, qualifying homebuyers don’t have to purchase a PMI, as the risk of potentially foreclosing on a home and therefore defaulting on a loan is eliminated. As a veteran, putting down 5–10% on a downpayment may still be something you’ll want to c. onsider, as this can lower the funding fee rate.
- Fewer fees. One of the hidden costs of homebuying are the accumulating fees associated with making the purchase. The only cost required by VA loans is a funding fee that can range from 1.4–2.3% of the total loan amount, depending on if you choose to pay a down payment as a first-time homebuyer. That may be paid in cash or rolled into the loan amount. It is also possible that you will not have to pay the funding fee if you meet certain requirements, especially if you qualify for a loan under a service-related disability or are a surviving spouse of a veteran who died in service. Other fees can be negotiated at the closing.
- Lower interest rates. Another perk of being federally backed is that VA loans come with lower interest rates than conventional home loans. Expect to pay 2.5–3% interest on the total loan amount.
- Future refinancing options. With a VA loan, you will have access to various advantageous refinancing options. An Interest Rate Reduction Refinance Loan (IRRRL) is a great refinancing option and allows qualified borrowers to reduce their interest rate or to convert an adjustable rate mortgage (ARM) to a fixed-rate mortgage. With an IRRRL, it is also possible to reduce your 30-year term to a 15-year term and pay the debt off faster. Cash-out refinancing is also an option down the road that allows you to take built-in equity and transform it into cash for any large life expenses.
Lastly, first-time veteran homebuyers will want to be aware that VA loans can’t be used to purchase farms or buy property in a foreign country.
How Can Hero Home Loan Help?
Hero Loan was intentionally designed to recognize and address the needs of veteran and other military service members. Through our community service involvement, like the Fisher House Project, which directly gives back to Veterans and their families, we offer our continued support, ensuring that our veterans feel appreciated and cared for.
We believe in providing a personalized customer service experience that will strategically get our homebuyers the best deal possible when it comes to their first time buying a house. In less than five minutes, you can begin an application for a VA loan. We don’t believe in making our clients struggle with paperwork and will gladly do it on your behalf to get you into your dream home faster. We offer closing times in as little as 14 days to get you and your family settled quickly.
Reach out to us by phone today at (866) 222-0219 to speak with a VA loan representative. You may also use our live chat option to connect with a lending expert. Take action and find out how you can qualify for the best home loan to make living in your dream home a reality today!