What You Need to Know as a First Time Homeowner
When you’re taking that first major step in building your wealth, it can be really daunting how many options there are and very tempting to just take the simplest option available. Unfortunately, the simplest options is usually the 30-year fixed. If you’re willing to do a lot of homework and perhaps spend a little more money right now, you can save yourself a lot of time, money, and trouble later on. We’ll be talking about the best mortgage option for the first-time homeowner, but first we’re going to give you a few tips to help your first home purchase go smoothly.
Get a Real Estate Agent – A Good One
This may seem counter-intuitive, and it may even be the opposite of what other people have advised you. Here are my reasons for recommending you get a real estate agent: real estate agents do a lot more than just help you find a home. They also help with the process of getting a loan. They probably have a few lenders that they know well and can recommend. These lenders are more likely to work harder to offer you better terms than another lender because they want the agent to keep sending them people. They are also a lot of things that the agent helps take care of (the sale contract, addendums, etc.) that you will need a lot of hand-holding through on your first time. If you don’t have an agent, the loan officer will try to assist you, but most of the heavy lifting will have to come from you directly. If you’re anything like me, you’re thinking to yourself, “I know a bit about mortgages, and I can research anything else I need to know. No need for an agent.” Trust me, sale contracts and other forms are weird and tricky, and getting a good real estate agent will pay off.
Another real value in a real estate agent is to protect you from getting a bad loan or working with a bad seller. There’s a lot of things you may not notice about a house that a good agent is trained to look for, and your lender may offer you terms that you think are standard or even a good deal, when actually you’re getting ripped off. An agent is there to protect you from this sort of thing. You may not need or want an agent every time you buy a home, but it’s a good idea to get one for your first home purchase and ask every question you can think of for future reference.
Remember that You’re Buying a Starter Home
Your first home purchase will almost certainly not be the home you are going to grow old in. It’s probably not even the house that your children will grow up in, so there’s no need to look for a house that works for that purpose. When you’re getting your first house, your primary location concern should be how far it is from your work. Your other concern should be whether it’s big enough for how much you anticipate your family growing over the next 3-5 years. You’ll probably have moved within 5 years to a home more suitable to raising children in. It’s many people’s tendency to be really picky about their first home, which is just silly. No home is perfect, and especially when you’re looking for a starter home, you should be more concerned about price than perfection.
Your Best Mortgage Option
Assuming you’re eligible for the VA loan program, your best bet is going to be the VA hybrid ARM, which gives you an extremely low interest rate for the first few years, and cannot increase by more than 1% per year after the initial fixed period. Especially since you’re not going to be in the home for more than 5 years, a VA Hybrid ARM doesn’t even have any risk associated with it. You get a super low interest rate with no risk of it going up in the future. If you’re very risk-aversive, take some time to learn more about the VA hybrid ARM, because there really is far less risk than the stereotypes would have you believe, and you can literally save tens of thousands of dollars just over the next 5 years by getting a hybrid ARM instead of a 30-year fixed rate. If you’re not VA eligible, there is still a conventional hybrid ARM, that can be a good option, but is not as good as the VA ARM, or you should go with a 15-year fixed. If the payment on a 15-year fixed is too high, the problem is not the 15-year fixed; it’s the price of the house. Contact us today with any questions or to get started.