Great question! It’s one I’ve been asked hundreds of times. My answer is the same whether you’re a 1st time buyer or this is your 5th time to purchase.
You need to know how much you are qualified to spend on this house. Bear in mind, just because you are qualified for a certain amount doesn’t mean you “have” to spend that much. You don’t ever want to become a slave to your house payment.
Start by talking to a mortgage loan officer. I always recommend choosing someone locally. The mortgage rates are essentially the same and it is a lot less complicated when you can get an answer looking someone eye-to-eye than dealing with a company in another state (or worse yet, over the internet).
The mortgage loan officer can tell you not only how much loan you qualify for but what kind of loan best suits your needs. Here in Clarksville we see a lot of VA loans. That’s natural since Ft. Campbell, KY (home of the 101st Airborne, the 160th Special Operations Aviation Regiment, and the 5th Special Forces Group) is located on our border. Anyone with VA entitlement can get a VA loan, provided the credit score and debt-to-income ratio is sufficient. Every lender in Clarksville knows about VA loans and can tell you exactly what you need to do to get one.
If you or your spouse have never been in the military and you have no VA entitlement, the loan officer can explain FHA and conventional financing. Less than 2% of our buyers have the cash to pay for a new home, (unless you’ve just sold your previous house or you had the winning lottery ticket). There are even programs designed for first-time buyers in our area; again, that’s where the local mortgage loan professional comes in.
The next step is to select an informed realtor. A good realtor is an invaluable source of free advice and can walk you thru all the steps of a home purchase. Your realtor should be able to work for you as a “Designated Buyers Agent”. What does that cost? In our area, it normally costs the buyer nothing. The realtor’s commission is traditionally paid by the seller (again, I’m talking about Clarksville), so you can get professional representation with no additional fee to you.
I’ll talk about what to look for in choosing a realtor in a future blog. If you’ve had a good (or bad) experience with a local lender and want to post a comment for others, please feel free.