Helpful Resources for First-Time Homebuyers

November 29, 2022

Despite all the changes over the last few years, one thing remains true: homeownership is an important piece of the American dream. Nearly 75% of Americans place a high level of importance on owning a home. Having a place to put down roots and build a life is important when considering the other life events that people often work towards, like starting a family.

Even though homeownership is a popular goal across demographics throughout the country, that doesn’t change the fact that buying a home for the first time can be a daunting experience. Not only are large sums of money involved, but there are several steps in the process that each have significant importance. Buying a home is unlike any other major purchase.

For first-time homebuyers, having the right resources to make the experience smoother is essential to successfully arriving at the closing date.

Incentives and Grants: Is there home-buying help out there?

Cost is one of the biggest hurdles when it comes to buying a home. Many people have the desire to own their own home but don’t quite have the savings to make it happen right away. With a range of incentives and grants available from the federal level right down to the local level, prospective homebuyers may find that purchasing a home isn’t out-of-reach after all.

In Illinois, the Illinois Housing Development Authority (IHDA) has a range of incentive and assistance programs that offer fixed-rate mortgages from partner lenders and varying amounts of cash back to provide down payment assistance or closing cost coverage. The cash back amounts may be forgivable or offer deferred payment. It’s important to review the available programs and understand the qualification criteria.

There are a number of federal programs and incentives also available. For starters, first-time homebuyers can withdraw up to $10,000 from their traditional IRA or Roth IRA without the early withdrawal penalty in order to help fund their down payment.

Down payment flexibility is also possible through some federal mortgage programs that offer low down payment requirements and even some cases where no down payment is needed. Each program will have unique qualification criteria that may include income, neighborhood income statistics, credit score, and more. Partnering with a knowledgeable mortgage broker can be a good first step when trying to understand the many different programs available for first-time homebuyers.

Mortgages and Interest Rates

The median home price in the United States this year reached $428,700. Most people do not have hundreds of thousands of dollars on-hand to buy a home. As a result, many people seek out a mortgage from their bank or another lender in order to complete the purchase. It’s important to understand that not all mortgages are the same and choosing the right one may help save money in the long run.

Conventional loans are among the most popular types of mortgages. These tend to have lower borrowing costs compared to other options but may require larger down payments. Lenders will verify a buyer’s income, employment, debt servicing ratio, and other details in order to ensure they qualify for the loan. While a conventional loan may be the most popular option, it is far from the only one available to first-time homebuyers.

Government-backed loans aim to help certain homebuyers enter the housing market. The Federal Housing Administration (FHA) offers FHA loans which will allow some buyers to finance up to 96.5% of the property. There are USDA loans which target rural areas and may not require any down payment. VA loans are also available for both veterans and active-duty military personnel. These don’t require a minimum down payment, mortgage insurance, or credit score.

Depending on the type of mortgage, buyers will also have to decide if they want to proceed with a fixed-rate mortgage or an adjustable-rate mortgage. Fixed-rate loans offer predictable payments over the life of the loan but the rate will typically be higher than an adjustable-rate mortgage. However, those that choose adjustable-rate mortgages face the risk of seeing their mortgage payments increase in the future. This is a scenario many homeowners are facing this year as the Fed raises interest rates to tackle inflation.

Once again, having a trusted real estate partner can make navigating available loan types much easier for new homebuyers.

What’s in a Title? Title Search and Title Insurance

A home purchase isn’t like “buying” a home; it’s about buying the title to a home and the property where the home sits. A title search includes the most important details about a property including the location, as well as any liens or easements that the owner and potential future buyers should be aware of.

A common example of a lien on a home would be a lender staking their interest in the property. This would show who the lender is and how much the mortgage is for. The lawyer representing the buyer would want to see that either all title defects have been removed or arrangements have been made to ensure the title is clean upon transfer to their client.

Because the title is such an important piece of the homebuying transaction, a title search is one of the most important parts of the closing process.

The challenge with a title is that it may not show items that have not been added to the title yet. For example, a contractor who hasn’t been paid and would like to put a lien on the property has a period of time to do so. The initial title search may not show this if it’s still being processed but the new homeowner would become responsible for the debt on their title.

This is where title insurance comes into play. It helps protect homebuyers and lenders when due diligence is completed but the unexpected still happens. Title insurance simply insures against title defects and should not be confused with homeowner’s insurance, which protects the actual home and the belongings inside.

A Trusted Partner Along the Way

Buying a home for the first time can be equal parts exciting and intimidating. Having trusted partners along the way can make the process much more comfortable. From lawyers to realtors to mortgage brokers, there is an entire team helping the process along.

At Janus Title, we offer decades of combined real estate experience and provide an unmatched title insurance experience. Using exclusive technology, we help your real estate team get your deal done faster than anyone else with personalized, hands-on service available along the way.

To learn more about the Janus Title difference, contact us today.