Looking at a single family homes for sale is a very special event, but like any unfamiliar process, it can be an uncomfortable learning experience. A good example of this is when first-time buyers make serious mistakes in the way they handle the down payment for their purchase. If you are currently searching for your first home or planning to do so soon, avoiding the following all-too-common down payment mistakes is a critical part of successfully completing your home purchase and the following information can help you accomplish this goal.
Failing to have enough money set aside for the down payment
Depending on the type of mortgage being applied for, first-time home buyers typically need down payment funds equal to as little as 3.5 percent or as much as 20 percent of the actual purchase price of the home. However, buyers must remember that the down payment amount is in addition to the actual closing costs associated with the purchase. So it is critical to determine how much cash will be needed to cover the down payment plus closing costs, as well as any other expenses associated with the purchase, such as utility deposits and moving expenses.
Failing to properly season down payment funds
Many first time home buyers are thrilled to have a helpful gift of funds from a parent or other relative to assist them with the down payment and closing costs. However, problems with these gifts often arise when the funds are not properly sourced and seasoned. Since most mortgages require explicit records showing the source of gifted funds and strict timelines for how long they must have been held in an approved bank account, buyers must make sure that any gift funds they want to accept will pass the underwriting process for their mortgage. To avoid problems with gifted funds, discuss them carefully with your mortgage lender when applying for the mortgage and then follow their instructions to make sure that all sourcing and seasoning timelines are properly followed.
For additional information about the down payment process and how to handle it correctly, first-time buyers should always have a candid conversation with their trusted real estate professional before beginning to view homes. In addition to helping buyers understand the rules regarding down payments, these agents will also be able to help guide cash-strapped buyers to any down payment assistance programs that may currently be available in their area. Paying careful attention to the process and being sure to follow all the rules involved will help make the transition from first-time buyer to first-time home owner an enjoyable one.