A guidance for the first time buyers of home:

by Payel Kundu

Nov 5, 2023 2:00 PM EST

It is for real an ‘American Dream’ to own a house. Purchasing a home will most likely be among a person’s largest and most important investments. As with any major purchase, they should understand the product before they buy it. Hence, unlike most of the other commodities, buying a house can be a much more complicated process than comparing prices. Therefore, it is very important that a first time home buyer understands the process of buying a home as clearly as possible. Here is guidance to the fundamental factors of what one should consider while buying a home for the first time.

  1. Eligibility: First time home buyers in NJ don’t need to be a person who hasn’t bought a home before. Whereas in reality it is their name that has not to be enlisted in any kind of deed of any house or piece of land for the past three years — whether they lived there or not. As long as they haven’t had any stake in real estate in the last 36 months, they’ll probably be considered a first-time home buyer for loan purposes— this is though isn’t any final saying and loan terms can and do vary, and are always subject to change.
  1. Loan options: Federal homebuyer programs like FHA, USDA and VA loans are available to all U.S. citizens and legal residents, though each program has its qualifications. For example, one can only get a VA loan if you’re active-duty military personnel, a veteran or a family member thereof.

           FHA loans-

            The Federal Housing Administration (FHA) is a component of the United States

Department of Housing and Urban Development (HUD), and FHA loans can offer big advantages for first-time buyers. Namely, down payment amounts as low as 3.5% plus more accommodating credit qualifications.

Your lender can go over the specifics with you, but baseline FHA qualifications include:

  • A minimum credit score of 580 to qualify for a 3.5% down payment (expect to put down 10% if your score is below this number)
  • A debt-to-income ratio under 43%
  • Reliable income with proof of employment-

Additionally, a home purchased with an FHA loan can only be used as your primary residence — this isn’t the loan type to use when purchasing your first investment property.

  • You’ll also need to pay for mortgage insurance (MI) when using an FHA loan, which further protects the lender if you stop making payments on the loan. The cost of FHA mortgage insurance usually runs between 0.45% and 1.05% of your home’s value annually (plus an upfront premium of 1.75%) — so factor that into the calculation of your monthly mortgage payment.

USDA loans

The United States Department of Agriculture is another source of government-backed loans that may be suitable for you as a first-time homebuyer — particularly if you live (or are interested in living) in a rural area.

Qualifying for a USDA loan requires that the property be in an approved rural area and that — as with an FHA loan — it will be used as your primary residence.

You’ll need a credit score of 640 or higher. You will also need reliable income — but not too much. Your adjusted household income can’t exceed 115% of the area’s median income for a USDA home loan.

VA loans

A great resource for qualifying current and former service members, the Veterans Benefits Administration offers home loans with very favorable terms.

Even as a first-time homebuyer, taking a VA mortgage loan can mean getting into a home with no down payment, no mortgage insurance, and low-interest rates.

You will need to provide your chosen lender with a Certificate of Eligibility (COE) from the VA as eligibility is tied to duty status, length of service, credit history, and income.

VA Native American Direct Loan

Qualifying U.S. veterans looking to purchase or build a home on Federal Trust land may be eligible for a VA Native American Direct Loan (NADL).

As with standard VA loans, you’ll need a Certificate of Eligibility and a satisfactory credit history. With a NADL loan, you’ll also need to be a member of a tribal organization that participates in the VA direct loan program, and the home you’re interested in buying on Federal Trust land will need to be your primary residence.

3. Capability: Home being such a large investment, one should know what they can afford, both in terms of the mortgage and the down payment. One must come up with a budget before they even start looking for houses. In this way, both of the partners can realistically build a “wish list” that fits into their price range. For some first-time homebuyers, a 20% down payment can be the suggested amount. However, putting down as little as 3% is also acceptable. To ensure one has enough money to do this, here are a few savings suggestions:

  • Setting aside tax refunds and work bonuses: It is best for anyone who is planning to buy a home to save the April tax return for this important investment.               
  •  Set up automatic savings to be deducted from one’s account: Many savings apps are now available online and on mobile devices to help people keep a certain amount of money for future investments. It is wise to take advantage of what is out there and label one’s investments so that they know which sector their savings are going to.  

4. Choosing a Real Estate Professional:-

All the details involved in buying a home can be confusing. Finding the right real estate professional for you is a great first step toward making the experience much easier.

In New Jersey, there are four brokerage business relationships:

seller’s agent, buyer’s agent, disclosed dual agent and transaction broker. Each of these relationships imposes certain legal duties and responsibilities on the licensee, as well as the

seller or buyer represented.

All four of these types of agents must be licensed by the New Jersey Real Estate Commission (REC), a division of the New Jersey Department of Banking and Insurance. Agents are required to demonstrate, to the Real Estate Commission’s satisfaction, that they are honest, trustworthy and of good character and integrity in order to obtain a license.

All licensed agents work under the authority of a real estate broker. One of the best sources for finding an agent you can trust is through referrals. Ask someone you know who has   recently purchased or sold property about their experience.

Compile a list of several agents and talk to each one before choosing. Look for an agent who listens well, understands your needs, and whose judgment you trust. The ideal agent knows the local area well and has resources to help you in your search. Overall, you want to choose an agent that makes you feel comfortable and can provide the knowledge and services you need to each one before choosing. Look for an agent who listens well, understands your needs, and whose judgment you trust. The ideal agent knows the local area well and has resources to help you in your search. Overall, you want to choose an agent that makes you feel comfortable and can provide the knowledge and services you need.

5.Considerable factors about the surrounding of the house: 

• Quality and availability of schools and libraries;

• Proximity to work, major highways and mass transportation;

• Immediacy of shopping, religious centers, hospitals and recreation facilities/parks;

• Property tax rates, income tax rates and other community expenses as compared with similar homes in other neighborhoods (i.e., association fees, snow and trash removal, common ground maintenance);

• Utility expenses, trash collection and sewage disposal (past utility expenses are available from the utility company);

• Availability of public services such as police and fire protection;

• Local zoning ordinances and conditions of other properties in the neighborhood. 

These are the few factors to start with when a person is considering buying a home for the first time in NJ. There are several other factors and more complicated sectors to look into and take care of for the same reason. But these are the key factors that one should research on and take care of at first.

Disclaimer: This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Please do your own due diligence.

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