First Time Buyers

As a potential first time buyer, you may feel a little overwhelmed with the entire process of buying a new home. As one of the most important decisions your family will ever make, it has serious financial and emotional implications and is recognized as the cornerstone of the American dream.

Our staff will work with you and provide you information and resources necessary to make the dream of buying your first home become a reality. The more you know about the home buying process, the more likely you will be able to purchase the home of your dreams.

While there are advantages and disadvantages to home ownership, for most families, the advantages of buying a home far outweigh the disadvantages.

  • Home ownership is a forced savings plan because your mortgage principal payments are retained as equity in the home.
  • If a home is properly maintained, it is usually a good long-term investment. Its value will most likely increase over time.
  • You can deduct property taxes and interest payments from income tax.
  • Because inflation causes prices and incomes to rise, over time mortgage payments become cheaper in "real" dollars.
  • As your equity builds, you can step up to a larger home or borrow against your home to finance large purchases.
  • Home ownership can enhance your family's sense of control over your lives and environment, as well as promote stronger community ties.
  • You can customize the home to suit special needs and tastes.

Prepare for Home Ownership

You should have at least three to five percent of the purchase price of a home for the down payment, but ideally even more. Usually, the bigger your down payment, the better interest rate you can get, and at 20 percent, you will not be required to purchase private mortgage insurance (PMI).

Interest rates are not really a problem right now. Even with the unpredictable little dips and swells in mortgage rates of late, they're still at historic lows in the 6 percent range; homeowners paid eye-popping sums for their mortgages a generation ago, to the tune of 11.85 percent in 1985.

There are several rules of thumb about how much house to buy. One is that a home's asking price should be no more than two and a half times your gross annual income. Another looks at your mortgage payment as a percentage of your gross monthly income: Don't exceed 28 percent. These numbers are intended as limits, not goals; if you buy a house that's a bit under your means, rather than right at the limit or above, you'll have more money to spend on things you enjoy.

The mortgage lender's office is not the place to find out scary news about your credit report. Check your credit scores with all three credit bureaus and get your FICO score before you apply for a mortgage loan to make sure there are no errors. Fix any errors that aren't your fault; if you have some blemishes on your record, like late payments, you may want to let some time pass with good credit behavior before seeking a home loan. Your credit scores have a real effect on the interest rate you'll be able to secure, which can make a difference of tens of thousands of your dollars in the long run.

For a copy of your credit report and other information on credit, call or use the Internet:

Pre-Qualify for Your Loan

The most important first step you can take is to pre-qualify for a home loan. By going through the pre-qualifying process, you’ll learn what's involved, what's expected of you and just how much home you can afford. By knowing how much you can borrow before you start, you can focus on new homes within your price range, saving time and simplifying the process.

Select Your Home

When you feel you are financially ready to purchase a new home, you can meet with our staff and select a house plan that meets your needs and wants. You should also look at our neighborhoods and see which one best fits your needs and lifestyle.

By spending time in the areas where you would most like to live, you will get a strong sense of their character. Check out the neighborhood, visit the area stores, observe traffic and explore the local parks and recreation facilities. It’s also a good idea to visit on different days and at different times of day. You might also want to drive back and forth from work at your normal time to get a sense of the traffic obstacles you may face.

Driving, biking and walking through neighborhoods are wonderful ways to picture yourself in a particular neighborhood and to determine what kinds of homes are available in different areas of a community. Stop at open houses every chance you get. Your choice of neighborhood will influence your lifestyle, so remember location is crucial.

As you consider different plans, evaluate each based on needs and wants. Be flexible, realistic and responsible. Develop a checklist like the one below. The checklist will help you answer the most important question of all: Can you and your family be happy living in this home? Remember to be realistic. Your first home will most likely not be your dream home.

House Hunting Checklist

  • Does the house have enough bedrooms and bathrooms?
  • Is there adequate storage space?
  • Are there high quality schools in the area?
  • Is the location of the house and neighborhood convenient?
  • Is there a homeowners' association?
  • Is the area quiet?
  • Does the floor plan suit your lifestyle?
  • Is the house energy efficient?
  • Is the yard easy to care for?
  • What community services are available?
  • Are the appliances and fixtures adequate?
  • What are the average maintenance costs for the house?
  • How high are local property taxes?

Obtain Financing

Once you know how much you are going to spend for your new home it is time to shop for a mortgage. Mortgage lenders include commercial banks, savings and loan institutions, mortgage brokers and credit unions.

Several types of mortgages are available. Conventional loans typically require a 20 percent down payment. Products more suitable for first-time buyers may require as little as zero to five percent down and have more flexible qualifying criteria.

Two possibilities for low- and moderate-income home buyers are Fannie Mae's Community Home Buyers Program and Freddie Mac's Affordable Gold Program. Many direct lending, subsidy and mortgage insurance products are also available through federal, state and local agencies such as the Federal Housing Administration, Veteran's Administration, Rural Housing Service and state agencies in Georgia and South Carolina.

Besides the down payment, carefully compare mortgage options based on these criteria:

Annual percentage rate (APR). The APR is the total yearly cost of a mortgage as a percentage of the loan amount. It includes the contract interest rate, mortgage insurance and points (each point equals 1 percent of the loan amount). It is a better way to compare loans than the interest rate alone.

Interest rate lock-ins. The interest rate you are initially quoted may not be the same at closing. Because a higher rate may affect your ability to qualify, lock in a low rate as soon as possible.

Application and origination fees. Lenders frequently charge fees to cover processing, credit check, appraisal, points and other overhead costs. Try to minimize these expenses.

Term. For most first-time home buyers a 30-year term to pay off the mortgage is appropriate.

It is also crucial to determine if you want a fixed or adjustable rate mortgage. A fixed rate mortgage is most common for first-time buyers. Such loans are fully amortized with a fixed interest rate for the entire term -- both the principal and interest are paid off at the end of the loan. Payments are usually monthly and stay the same over the life of the mortgage. It is ideal for families that plan to live in their homes for a long period of time.

An adjustable rate mortgage (ARM) has an interest rate that is adjusted periodically, usually every one, three or five years, based on money market conditions. Interest rates are determined by an index written into the loan agreement, and there is a cap limiting the amount that the interest rate can fluctuate. The primary advantage is that you might initially get a lower interest rate. The major disadvantage is that future increases may mean higher monthly payments.

How to Compare Loans

Look at the following when comparing loans:

  • Down payment required.
  • Both the contract rate and the annual percentage rate (APR).
  • Ability and conditions for locking in an interest rate.
  • Application and origination fees.
  • Term of loan.
  • For adjustable rate mortgages, how often the rate can be adjusted, the index used, and the rate cap.
  • Whether loan and closing costs can be rolled into the loan.

Negotiate and Enter Into Contract

Once you have found both a home and a mortgage, negotiate your final price. You must have a contract, or offer, before the official mortgage application process can begin.

When everything meets your approval and the seller accepts your offer, you enter into a purchase contract. Have your lawyer review it with you. The contract includes: full legal description of the property, amount of earnest money (good faith deposit of money to show that you are serious about purchasing), length of time the offer is valid, projected closing date, names, purchase price, financing details, title warranty, stipulations, and signatures and dates.

Loan Approval

The next step is to obtain financing for the home. This process is simplified if you have already been prequalified. The lender asks about your income, expenses, credit history, employment and the terms of the purchase offer. At this time, you complete the application form and pay an application fee, pay for a credit report and appraisal, receive an estimate of closing costs and truth-in-lending statement that provides estimated APR, receive the U.S. Department of Housing and Urban Development's handbook to settlement costs, and receive loan servicing and other state or local disclosures.

After the interview and application are completed, loan processing begins. The lender gathers a credit report, income and employment verification, deposit verification, previous housing expenses, and appraisal report. It can take anywhere from one day to six weeks to receive loan approval. Once it is approved, the lender will provide you a commitment letter. This is the formal loan offer. After carefully reading the commitment letter (preferably with your lawyer), you can sign it and agree to the loan.

Closing

The final step is the closing, a meeting between you, your lender and the seller. Other interested parties, such as your lawyer or real estate agent, may also be present. The closing can be broken down into three phases.

Review and signing of loan documents. In the first phase, you review and sign loan documents required by the lender.

Exchange of documents between buyer, seller and lender. You and the seller receive separate settlement statements detailing an exact accounting of expenses and credits. These statements are reviewed and each item is explained. All copies are signed and both you and the seller get copies.

Disbursement of funds. Once the documents are signed, dated and notarized, funds are disbursed. At this point, you provide a cashier's check for the down payment and checks to cover settlement costs. These costs typically include prepaying a portion of property taxes, home owner's insurance and mortgage insurance. Many of the closing and loan costs (ranging from $3,000 to $5,000 for a $100,000 mortgage) can be wrapped into the loan if you do not have enough cash in hand. In return, you receive the deed to the property and join the ranks of home owners.

Understand the Time Frame

Building a new home is a detailed process and often takes between 90 and 120 days. This time frame can vary greatly depending on the season and weather conditions. Understanding the time frame and being able to discuss it with your sales counselor will help you plan adequately for the day you move in to your new home.

This time came be shortened if you select one of our pre-built homes or a Quick Move In home already under construction. Our sales counselors will go over our inventory with you.

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