If you are planning on purchasing your first home, you have come to the right place. Because Weichert Financial Services partners with one of the largest real estate companies in the nation, we specialize in helping first-time buyers navigate their home purchase journey with less stress.  Many first-time buyers have significant misconceptions about the homebuying process, including the amount of down payment required to purchase a home.  We find that education is a key first step in making the process easier. 

There are many challenges first-time buyers must overcome in order to become a homeowner.  We are well equipped to help you successfully surmount each obstacle on your journey. 

Assets needed.  Liquid assets (cash) are needed to purchase a home.  In addition to having sufficient funds to pay for the down payment and closing costs, buyers must often show that they will have cash reserves after the transaction is completed (always a good practice, for owners and renters alike).  Many first-time buyers believe that 20% of the sales price is required for the down payment.  In the vast majority of instances, we can assure you that this is not the case.

• Down Payment.  At Weichert Financial Services we offer a wide variety of minimum or no down payment alternatives. For veterans, active military, and those who serve in the Reserves or National Guard, as little as no down payment may be required for Veterans Administration (VA) mortgages.  For properties in rural areas, the USDA’s Rural Housing Service guarantees no money down loans for lower-to-middle-income applicants.  Federal Housing Administration (FHA) mortgages require a minimum of 3.5% down payment and Fannie Mae and Freddie Mac offer 3.0% down payment alternatives.  
• Closing costs.  Depending upon the transaction, closing costs can run anywhere from 3.0% to 6.0% of the loan amount.  There are ways to lower or eliminate these costs. For example, working with our real estate partners, your offer can include a provision which asks the seller to pay for some or all the closing costs. We also participate in various state and local housing programs which offer grants and/or loans for closing costs.
• Innovative Solutions.  At certain times, we can offer an option to increase your interest rate which will lower the amount of closing costs charged to the buyer of the home.  Or if you have a qualified 401K retirement plan, the plan may offer an alternative to borrow against the asset in order to help you purchase a home.  Note that all plans do not offer this option.  Also, there are ways in which your parents can help you purchase, through a gift or joining with you on the purchase transaction. 

Credit Scores.  You may have heard that a certain credit score is needed for a mortgage to be approved. While this is true, many do not realize that a lower credit score can also raise your interest rates and thus your monthly payment on the home, even if it is high enough to obtain the mortgage. We can help you with a plan to raise your credit score before you make an offer to purchase a home.  This plan may involve removing erroneous information from your credit report, paying down certain debts, or changing the structure of debts. A higher score may not only lower your mortgage payment, but also help you lower costs in other areas such as car loans, credit card debt, insurance costs and even rent.  This is one of the many reasons why it is so important to meet with us early in the process of considering purchasing a home.

Income.   Your income, as well as your current debts/obligations, will help determine not only your qualifications to purchase a home, but also help you determine the affordability of the monthly payment. That is why it is so important to determine your budget before you undertake the search for a home.  Regarding qualification, it is important to confer with your Mortgage Advisor so that you understand how much of your income can be figured into the qualification equation. Your employment or self-employment history, structure of pay and other elements can affect this qualification scenario.  For example, if you have been working for less than a year, that may not be enough of a track record. On the other hand, if you recently graduated from school, the time you spent pursuing that education may count towards the employment history.

Additional Information Concerning Affordability.   One area where education is vitally important when considering purchasing a home is affordability. If you are paying rent of X dollars per month, comparing this amount to a mortgage payment is not an accurate comparison unless you factor the following concepts into the equation:

• Tax Deductibility.  Rent is not tax deductible, but home mortgage interest and real estate taxes may be deducted from your taxes. We advise consulting with your accountant and/or financial advisor to determine how you might benefit from this deduction. If you don’t have a relationship with an advisor, there is a chance we can refer you to someone in your area.
• Forced Savings Plan.  While 100% of your rent goes to the landlord, a portion of the mortgage payment goes to pay down your mortgage if it is not an “interest only” payment (a mortgage option which is very rare today).  This means that hundreds of dollars per month could be helping you build equity in your home.
• Inflation Protection.  While 100% of your rent payment is subject to any increases levied by the landlord, only a portion of a mortgage payment is subject to increases.  Therefore, as time goes on, rent payments tend to rise faster than mortgage payments, making the mortgage payment more affordable in the future.  The exception would be for adjustable-rate mortgages, which is not a popular option for first-time homebuyers.
• Investment.  While we can never guarantee the future value of a home, when you rent there is no chance that you can benefit from rising home prices because you don’t own the home.  Homes have a long history of appreciation going back generations.

These economic benefits help explain the findings in the September, 2020 Federal Reserve Survey of Consumer Finances that the median U.S. household net worth is $121,700, but looking at the differences between homeowners and renters reveals something quite astonishing: in 2019, the median net worth of renters was $6,300 while homeowners enjoyed a median net worth 40 times that – $255,000! (Holzhauer, Brett “Here’s the average net worth of homeowners and renters,” Feb. 27, 2023, www.cnbc.com).This disparity has surely widened after home prices increased significantly during the period of 2019 to 2022.

Add these economic concepts to the pride of homeownership and you can see why purchasing is often referred to as the American Dream of Homeownership.  You are providing security for yourself and your family, as no one can tell you to move. You have the freedom to own pets and paint the walls the color you choose.   In addition, studies have shown that neighborhoods of owners are safer than neighborhoods of renters ( Rafter, Dan, “Homeownership and crime: A complicated relationship,” April 28, 2014, www.hsh.com).  

We look forward to helping you on your journey of homeownership.  The “We” in Weichert means that we will be with you every step of the way.

Pre-Approval – The first step.   These factors point to the importance of meeting with one of our Mortgage Advisors before you determine which homes you might consider purchasing. We can help you with structuring your qualifications, credit and other facets which will make you more secure in making an offer.  We call that PEACE OF MIND.  What’s more, we will be able to vouch for your qualifications to the seller’s listing agent.  Because we work locally in partnership with a real estate company, our opinion may carry more weight and give you an advantage over online competitors when making an offer.  If you are not working with a real estate agent, we can also make a recommendation of a real estate professional who works in the neighborhood(s) in which you are interested.