What Future First-Time Home Buyers Need To Know

When I became an Idaho licensed real estate agent in 1991, the first thing I learned is this:
Your financial success depends on buying a home. The primary residence is the foundation upon which most Americans build for retirement. The sooner you start, the sooner you can achieve financial independence. So, save your money, pay your bills on time and improve your credit score!

Paying rent IS buying a home- for your landlord. Unlike rent, every monthly mortgage payment reduces what is owed, until one day- you have no mortgage payment. Everyone pays for a place to live, so buy your own (pay yourself) and reap huge rewards.

With rents rising, you may save monthly by purchasing a home. However, the REAL money in owning a home is in long-term tax-free appreciation. Gains on your primary residence are exempt from capital gains taxes (up to $250k single, $500k married). You must live there 2 out of the last 5 years before you sell. Where else can you make tax-free money without working?

Long term, owning real estate is a sure thing. Homes have, on average, appreciated in the 3-4% per year range over the last 70 years. Home prices are expected by NAR to rise 3.9% nationwide in 2017 with Western metros leading the pack with expected price increases of 5.8%.

Locally, the median existing home price in Ada County has risen 74% in 6 years! If you had purchased at the bottom of the market and timed it perfectly, a median priced home would have added well over a hundred thousand dollars to your net worth in the last 6 years. Renters got nothing but higher rent, while landlords made huge gains.

Now before you say "I don't qualify." or "I don't have enough money.", are you sure?

Qualifying for a loan has gotten easier and there are zero/low-down payment programs available again. Your next month's rent may be ALL you need to buy a home.

I recently helped a first-time home buyer, who needed only a half percent down payment with help from Idaho Housing and the seller paid all of their closing costs. They bought a home for $850 down payment, plus a $275 home inspection. That's $1125 total to buy a home!

The #1 reason to buy a home now is low mortgage interest rates. Rates are still near half the long term average, making this a once-in-a-lifetime opportunity to lock in low payments and qualify for more home. It can't last forever. Don't miss this opportunity!

Do you qualify? Don't guess. KNOW. Call me 866-3481 and I will refer you to proven local lenders.

How Much Money Do You Need to Buy a Home (primary residence)?
Much depends on the financing you qualify for. In most cases, you'll need $1000 (possibly $500) earnest money deposit to make an offer on a home, which is credited toward your closing or refunded if the offer is not accepted. It is common to ask sellers to pay buyer closing costs, so let's talk about down payments to cover:
VA Loans are zero down with no monthly mortgage insurance, which saves the buyer nearly 1% per year, compared to other low-down financing options. I have helped many veterans get closing costs paid and ALL of the earnest money back at closing, costing the buyer nothing out of pocket other than a home inspection (around $300).
FHA loans are the easiest to qualify for (credit score 620+), making this the most common program used by home buyers today. FHA requires 3.5% down payment coming out of your own pocket, although it can be a gift or be borrowed from a 401k or against certain assets your lender must approve.
IHFA (Idaho Housing) loans are for first-time (not owned in the last 3 years) buyers who make less than the median income. Idaho Housing also offers help in the form of loans or grants to cover the down payment and some closing costs. Earnest money may be all you need to buy a home. See Ida Mortgage Down Payment Assistance or ask me for information.
Rural Development Loans are zero-down loans for lower income buyers in less populated areas. Only areas in Kuna & Star qualify in Ada County. In Canyon County, the Middleton area, areas West of Caldwell, areas South of Deer Flat Rd near Nampa qualify. Refer to the RD map for areas that qualify.
Conventional (non-government) Loans require as little as $500 down with golden credit, but most home buyers will need 3-5% down payment. This depends on the condition of the home, price range and other factors in an ever-changing mortgage market.

Buying a Home- Step #1 Get Qualified For Loan
Are you even in the ballpark? I can pre-qualify you with a short Q&A on the phone and refer you to a reputable local lender. For little more than an hour of your time and the cost of a credit report, a lender can tell you exactly what your options are in financing a home purchase. Before you look at any homes, you need to know:

  • If you qualify and if not, what you need to do.
  • Which loan programs you AND the home must qualify for
  • How much you'll need for down payment/closing costs to complete the purchase
  • The price range of homes you can buy with a comfortable payment

Having a pre-qualification or pre-approval letter from your lender not only prevents you from wasting time on homes you can't buy, but also puts you in the strongest bargaining position with sellers. Many sellers will not even consider your offer without proof of qualification, including foreclosed homes. Take the first step and get pre-qualified.

Qualifying For a Home Loan- The Basics

Who is on your side in a real estate transaction?
The lender?  Maybe. The company exists to make money by originating loans, although your loan officer might be personally sympathetic to your interests.

The Title Company? No- impartial as a neutral 3rd party with equal obligations to buyer and seller.

The listing agent? No- most likely under contract to represent the seller, possibly able to partially represent both sides, but never fully and exclusively for the buyer.

An agent working with the buyer? You might assume so, but not without a contract for representation. In Idaho, only signing an Exclusive Buyer Representation Agreement holds your agent to the highest legal standard in representing your interests.

See my article Why Use A Buyer's Agent and Why Me.

Learn more about buying a home in SW Idaho and the home-buying process on my website: See my Blog, my Market Monitor and Newsletter for more details on Boise real estate, housing markets, supply & demand levels and much more.

Contact me today to get on the path to home ownership.
Dan Rowe ABR CRS GRI
Dan Rowe ABR CRS GRI
Broker