The average first time home buyer can’t afford to pay for their first home in cash and have to take out a loan.
There are several different loans you can get to pay your first time mortgage. Some of the options include FHA loans, VA loans, conventional loans, and USDA loans. However, since the standard first time home buyer will likely get an FHA or conventional loan, those are the two types of loans we will focus on for this article.
FHA Loans
FHA loans are loans issued by a private lender and insured by the Federal Housing Administration (FHA). When you are granted an FHA loan, the United States government provides a guarantee to the lender in the event that you don’t pay back the loan in its entirety.
If you have a low credit score and cannot afford a 20% down payment, you might want to consider an FHA loan. The minimum credit score for an FHA loan is about 570 along with a 3.5% down payment. If you have the cash to make a larger down payment, you may even be able to get away with a lower credit score.
Well, if FHA loans are so great, why doesn’t everyone get one? Sure, FHA loans are attractive to many people for different reasons, but this type of loan also comes with its fair share of drawbacks.
For starters and arguably the main downside of FHA loans is that you will have to pay mortgage insurance for the life of the loan. You will also have restrictions on the home you can purchase when using an FHA loan. Many condos, for example, do not meet FHA approval standards for one reason or another.
Despite its few drawbacks, FHA loans are a great option for a first time home buyer who has little cash saved up for a down payment and has less than perfect credit.
Conventional Loans
Conventional loans, on the other hand, are not insured by the federal government. Instead, this type of loan adheres to guidelines set forth by Fannie Mae and Freddie Mac.
Unlike an FHA loan, which you can only use to buy a primary residence, conventional loans can be used for the purchase of a primary or secondary residence as well as a rental home. You also don’t have to pay mortgage insurance with a down payment of 20% or more. Similarly, if you do have mortgage insurance, it can be canceled once the home’s equity reaches 20%. And the mortgage insurance for a conventional loan is lower than the mortgage insurance on an FHA loan.
Michael and Karen did what everyone and every online article told them to do; interview several Real Estate Agents for the job. They interviewed three Agents and chose the Agent who agreed with their price that they had set for their home; after all, who knows the value of their home better than the homeowners themselves. The other two Agents had suggested lower prices based upon recent home sales, homes that were currently under contract, yet not closed and homes that were actively for sale. Michael and Karen went with the Agent offering the higher list price to sell their home in order to receive the most money and to leave some room for negotiations.
They had listed their home for sale just at the end of the school season letting out for the summer. That’s a good time, they thought. Families like to move in between when school is in session.
Preparing their home for sale
With so much going on with their business, working long hours and with not enough hours in the day, they really didn’t have much time to prepare their home for sale. Even though they had read lots of good advice on how best to prepare for selling a home from a local Real Estate Blog; Imagine Your House, they just couldn’t find the time.
Their home is lovely as it is; they’d love you to see their collection of artistic magnets that they’ve collected over the years from places they traveled to all over the world, particularly the ones from Italy – love having them plastered across the fronts and sides of their refrigerator holding up daily reminders and scheduled events to attend. They should have taken a photo to share with you.
So many south Floridians love Coral Springs, making it a city with a huge draw from home Buyers flocking to reside there. With it’s excellence in school education, parents often will do almost anything to get their children enrolled; a main reason why Michael and Karen stuck around so long.
They couldn’t wait to share their love of dinosaurs with prospective home Buyers, as who doesn’t love a dinosaur…have you seen what the Jurassic park movies did at the box office?! The last Jurassic Park movie released has become the 4th most successful movie of all time based upon global box office revenue. And, imagine what the upcoming, Jurassic World; Fallen Kingdom, soon to be released movie will gross. Anyhow, the Oroleys know their stuffed dinosaur head collection that lines the hallway wall looking like dinosaurs right out of Jurassic park will be a huge hit with prospective, visiting Buyers.
Then there were the dining room walls covered with colors from the 80’s with rust and gold, perhaps not perfect, but at least long ago they had changed out the green shag carpeting underfoot as that would have been a definite need to go, they thought. (Thank goodness is my initial thought – we had the blue shag carpeting growing up in my parent’s home and it definitely isn’t a 2018 trend – I just aged myself, didn’t I?!) It didn’t matter anyhow as they had no plans of repainting the walls.
Michael and Karen just couldn’t be bothered too much…even though they understood well, that the cost of doing so would be minimal. No, couldn’t be bothered. With too many business days being extended well into the evening hours and with their busy lifestyle, there just isn’t any time left over for such tasks of preparing a home for sale. They’ll have their cleaning gals do their unusual cleaning and that will be fine. Too bad they couldn’t tackle the outdoors too. They’ve used the gals for years, and they do a decent job. Anything for the Oroleys to not have to tackle. Thank goodness they could always afford the luxury of having their home cleaned. Sell your home in Winter Park Fl
Making repairs to their home
Over the years many of the little projects around their home that needed to be taken care from time to time, just seemed to get ignored and pushed out until they became an acceptable feature of their home. Living with the loose cabinet hinges, missing screws from outlet covers, dirty air conditioning vent covers overhead, missing and worn out grout lines from bathtubs and more was the norm in the Oroley’s home. They had just upgraded their master bathroom a few years ago too and there’s been missing grout lines ever since. Guess their hired contractor did a less than stellar job. (That’s a whole other topic; How to hire a contractor for your home remodeling.)
All of those little projects needing to be tackled – flashing their apparent lack of home maintenance over the years. They had never meant to do it that way and with their next home they both discussed how it will be different…they definitely won’t ignore the maintenance. It just piles up and before you know it, years go by. They feel pretty confident that the new home Buyer will likely be handy and can take care of these little things once they move in – no big deal… or the new Buyers will just pay to have it taken care of for themselves. Michael and Karen could do it, but just don’t want to be bothered (you heard what they said before).
The receipt of a Buyer’s offer for their home
Their home had been listed for sale with the showings scheduled to occur Monday – Friday from 1:00 p.m. – 4:00 p.m. with Thursday allowing showings past 4:00 p.m. until 7:00 p.m. Then Saturdays from 10:00 a.m. to 2:00 p.m. – perfect times to view homes, they thought. Perfect for them anyway.
Then they waited. Why was it taking so long to receive a Buyer’s offer? Michael and Karen would lay awake at night wondering when they’d get a Buyer’s offer for their home. After the first few weeks went by with quite a bit of showings, weeks then went by without any showings, other than a few here and there. That had made them very anxious early on during their home selling process. They had just wanted to get started in the next phase of their life now that Christopher and Ashley, their kids, are grown and had moved out starting families of their own. They wanted to buy a home in east Boca Raton and already found an eXp Realty Realtor to help.
Anyhow, despite the long wait of 7 months to finally get to being under contract, they felt some relief (even with three price reductions beforehand).
The Buyer was financing their home purchase. They had sent over a contract along with a pre qualification letter from a Mortgage Lender. The letter indicated that the Buyer was approved for a $575,000 home purchase. The letter didn’t go into too much detail about the home Buyer’s credit report, their income or assets. It simply said “Congratulations – you’re qualified to buy a home for $575,000”. Okay, that’s good they thought, they’re qualified by their Lender to buy a home for $575,000 and their home is priced for $573,000.
Their home’s inspection
The Buyers inspections was set for 15 days out. More waiting, they thought. Why does it take them 15 days before they complete a home inspection?, Michael and Karen questioned…they hate waiting. Nonetheless, they waited. The Buyers showed up with their Real Estate Agent and the Inspector. Michael and Karen attended the home inspection too.
The Inspector was very thorough and completed his inspection in about 3 hours. Yes, inspections do take a bit of time and with larger homes, you can expect an even longer time frame.
So the home is good, Michael and Karen were thinking. They couldn’t imagine anything wrong with their home, other than the few items that needed repairing that they never got around to fixing as they told us about above. Hold on…it didn’t go exactly as they thought it would.
The Inspector revealed that the missing grout in their Master bathroom’s bathtub likely caused running water to seep into the openings over time that created a weakened tiled wall that will need to be replaced and the Inspector only hoped there was no mold growing behind the walls. What?! How could this be…it was just a little needed grout that was missing. Remember, they had mentioned this before. They knew it needed repairing.
