Are you a first time home buyer in Idaho? If so, you’ll want to take some time to ensure that you make all the right moves. After all, you’re making a long-term financial commitment, so you want to be sure to get it right.
Luckily, with the right real estate agent and mortgage lender in Idaho by your side, there’s no reason why you can’t realize a successful transaction. Here are a few tips to keep in mind when buying a home and securing a home loan as a first timer.
Understand the Different Mortgage Products Available
There are several mortgage programs out there, but each one may be better suited for certain buyers than others. As such, it would be in your best interests to look into the types of mortgage programs available, which ones you would be most likely to qualify for, and which ones will suit your financial profile and needs best.
For example, there are fixed-rate and adjustable-rate mortgages, FHA and VA loans, conforming and jumbo loans, and so on. But considering the fact that you’re a first time home buyer in Idaho, you may find
FHA loans somewhat attractive, given their lax qualification requirements.
More specifically, FHA loans come with low down payment minimums and lower credit score requirements than conventional loans. So, they may be easier to get approved for than other mortgage programs.
For instance, the minimum credit score to get approved for a conventional mortgage is usually around 620, but it’s typically recommended you have a higher score to get approved.
For an FHA loan, on the other hand, the minimum credit score required is at least 580. So even those who don’t have the best credit score may still be able to get approved for a mortgage to buy a home in Idaho.
Get Pre-Approved For a Mortgage
As a first time home buyer in Idaho, you’ll probably don’t know exactly how much you can afford in a home purchase. That’s why it’s so helpful to get pre-approved for a mortgage, as it will help you determine what your current financial situation can handle in mortgage payments.
Before you start house hunting, speak with a mortgage specialist. To get pre-approved, you’ll need to supply a few pieces of information that reflect your finances, such as bank statements, pay stubs, statements of assets and liabilities, and so forth.
Your mortgage lender will also take a look at your credit score. All these things will help the lender determine your ability to secure a mortgage and how much they would be willing to lend you. Armed with that information, you’ll be able to focus only on properties that fall within your price range.
Pre-Approval is Not the Same as Prequalification
It should be noted that a “pre-approval” is not the same as a “prequalification”. These are slightly different. A prequalification means that you’ve given your lender information regarding your income, assets, and employment. However, the information hasn’t yet been verified, and you have not been given a loan offer.
To get prequalified, you will have to apply for a mortgage, provide your lender with all the necessary information, and allow the lender to access your credit report. You’ll receive a preliminary approval along with a letter.
A preapproval represents a more comprehensive loan application process and is superior to prequalification. Sellers are more likely to view you as a serious buyer if you are preapproved. Plus, pre-approval will also help get the final mortgage approval process going after you’ve found a home you love and have put in an offer to buy.
Start Saving For a Down Payment
When you take out a mortgage, you’ll need to come up with a down payment by the time closing day arrives. This down payment will go towards the purchase price of your home. Depending on the price you pay for a home in Idaho, your down payment amount will be hefty.
Right now, home prices in Idaho are averaging $444,557, marking an 8.3% decrease over the past 12 months. While home prices may have dipped, they’re still costing homebuyers well over $400,000. Based on the average home price int he state, a 5% down payment would translate to $22,227. That’s quite a bit of money to have to come up with in a lump sum, but it’s required nonetheless.
That’s why it’s so important to start saving for a down payment as soon as you can to give yourself enough time to come up with enough to satisfy your mortgage requirements.
Get Familiar With First Time Home Buyer Assistance Programs
As mentioned, coming up with a chunk of money for a down payment can be tough, especially for a first time home buyer in Idaho. Thankfully, there are first time home buyer assistance programs available that can help that are specifically designed for first-timers in home buying.
You may also be eligible for certain tax credits through some programs. Speak with your mortgage specialist to find out if any down payment assistance programs are available to you.
Compare Mortgage Rates
Among the more important things to compare when shopping around for a mortgage are mortgage interest rates. The lower the rate, the better, as it will earn much less paid over the life of your loan. It’s imperative that you secure the lowest rate available to you when you apply for a mortgage for this reason.
Even 1% in rates can make a huge difference in the amount you pay in interest over the mortgage term. Let’s illustrate based on the following data:
- 30-year fixed-rate mortgage
- Home price of $400,000
- 10% down payment ($40,000)
Today’s mortgage interest rate for a 30-year fixed-rate mortgage is 6.25%, as of September 2023. Based on the data above, you would pay $431,250 in interest over the life of your loan. Now let’s say you paid an extra percentage point in interest: 7.25%. Based on that interest rate, your overall interest paid after 30 years would be $514,702.
That’s more than $83,000 more! That’s why it’s so important to secure the lowest interest rate and why it’s important to compare shops among different mortgage lenders and the interest rates they can offer you.
Why Now is a Great Time For a First Time Home Buyer in Idaho to Apply For a Mortgage
As mentioned, home prices have dipped over the past year. Based on that fact alone, you would be paying less for a home today than you would a year ago. But because interest rates are increasing at the same time, it’s possible to pay even more despite home prices being lower today, simply because you’re paying more in interest.
But that doesn’t mean it’s too late to get into the market. The fact that home prices have decreased gives you a great opportunity to buy at a lower price today than you would have last year and possibly even in the next few months. Over the long run, you’ll be able to build home equity and add to your overall wealth.
Further, mortgage interest rates are still on the rise. As noted earlier, a 30-year fixed-rate mortgage rate is currently 6.25%. Lock in your rate today before they continue to rise to help keep more money in your pocket.
Ready to Apply For a Mortgage?
Do you have questions about mortgage rates this week and home loans? Or are you ready to apply for a mortgage to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.