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What First Time Buyers Need to Know

February 9, 2016

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If you are a first time homebuyer, it pays to have a clear understanding of the sale process before you put on offer on a house. While you may have a down payment ready and confirmed, there are still other key components that will directly affect you, the buyer. If you understand how these components can affect you, then you can avoid unexpected surprises, which may cause distress or lead to your offer falling through.

Beyond the basics of down payment funds and qualifying for a mortgage, everyone should know what their credit score is, and how it can affect them. Keep watch over your credit score, even after you have found your lender. If something happens to change your score, you could suddenly find yourself no longer qualified for the loan you expected to get. If you are in the planning stages of buying a home, part of your plan should include paying down your debt to build up your credit score. This doesn’t necessarily mean paying off all your debt. The important thing is to make your payments on time and keep your debt to income ratio within reason.

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In line with the new Know Before You Owe Rules, it is very important to understand how much your closing costs will be and what they cover. These costs are above and beyond the sale price of the home you are purchasing or commissions paid to your Realtor®. Closing costs can include fees for running your credit report, getting an appraisal done, title search fees, and recording fees, just to name a few. With the new regulations, you will be given a full account in a disclosure form of what the costs are before your closing date. These fees can quickly add up, but there are ways to alleviate this additional cost to buying a home.

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Last year, Fannie Mae announced a new program just for first time home buyers that provides up to 3% of the purchase price on a home to help cover the closing costs. The HomePath Ready Buyer Program is designed to help get you into your new home through an education process that provides closing cost assistance so new home owners can better navigate the financial aspects of home ownership.

Closing costs can also be used as a negotiation point with a seller. Sometimes a seller will agree to cover some or even all of the closing costs for the buyer in order to close the sale. Even if the seller says no, your Realtor® can work with the other party to negotiate additional terms that may save you money, such as lowering the sale price in lieu of optional repairs. There are also mortgage loan programs that will add in the total of the closing costs to the final loan amount. This can be helpful, but be aware your total buying power for a home may be lowered to cover the difference.

When you are ready to sell or buy a home, my team and me are ready to help you through the entire process. Our goal is to make your experience both easy and pleasurable. Contact us today at (925) 634-7820, or by email at realestate@cecily.com.

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