Buying a home for the first time in California can be difficult, not only because buyers need to have a large sum on hand, but also because the buying process can be complicated. There are many things to think about like mortgage options, loan terms, and property types. They may even have to compromise on a benefit to take advantage of a better one given their circumstances.
Minimum Down Payment vs. 20% Down
First-time home buyers can choose from several financing options. Many government-backed mortgagees offer low and zero down payments to help aspiring home buyers close a deal on a residential real estate. PRMI Josh Mottashed, a mortgage provider in El Dorado County, offers a cheat sheet on these types of loans.
- FHA (Federal Housing Administration) Loans: 3.5%
- VA (Veteran Affairs) Loans: 0% for qualified buyers
- USDA (US Department of Agriculture) Rural Development Mortgage: 0% for qualified buyers
Those who don’t qualify for low down payment mortgages may have to prepare 20 percent or more of the house’s market price. It’s a tall order, even for first-time home buyers with money saved up. Many would say that there’s no contest here: a low down payment mortgage is sweeter than having to pay 20 percent down.
Low down payments are helpful in securing a house, but they also have an obvious drawback: buyers would have to pay higher monthly fees or extend their loan terms to complete the sum. For first-time home buyers, it’s important to think about their ability to pay not just at present but also in the future.
Monthly Payments vs. Loan Terms
Another consideration for first-time home buyers is how long they’ll want to pay off a mortgage. They have two choices: pay more for their monthly mortgage and finish repaying their debt in 15 to 30 years or keep their monthly payments low but over a longer duration.
The first option is ideal for buyers with a stable and sizable salary. The latter, meanwhile, may be the better option for those who are uncertain about their current source of income. Longer loan terms mean they would have to pay more in total, but the affordable monthly payments will enable them to own a house.
Single-Family Detached Home vs. Condominium
It helps to have a plan beyond having a roof over one’s heads when buying a house for the first time. It guides buyers on which type of property to buy. Single-detached dwellings are ideal for long-term use, while units in multi-family buildings (ex: condominiums, apartments, duplexes) offer flexibility. Basically, those who plan to have a family soon may want to buy a single-detached home, while those who want to establish an Airbnb and generate rental income may choose a condo.
By thinking these things through, first-time home buyers can make smart decisions about their future property.