Here’s how to buy your first home in today’s real estate market

Is it an unrealistic goal to buy a home in this market and afford the payments, as some say? However, don’t just take their word for it. Everyone has a different situation. This could actually be an ideal time to buy your first home if you meet certain conditions.

But what do you need to know before you take the plunge? Even in the current real estate market, a few simple steps can put you on the path to successfully buying and maintaining your first home.

The first piece of advice is to find out how much you can afford. Talk to a licensed and experienced real estate agent in your area or find an online mortgage calculator. Knowing this before you shop is always a good idea and will help ensure you are getting the best possible deal. A good real estate agent who is familiar with your local market can help you find the best homes in your price range and guide you through the loan application process.

You also need to know what your credit rating is. Your credit rating, along with your available down payment, plays a role in determining the interest rate you will have on your loan. Also start looking for cash. The more you can invest in your new home, the lower the loan balance will be. This leads to lower monthly loan payments.

No or small deposits are accepted and require little or no cash from the buyer. Today, buyers can buy a home for as little as a four percent discount. Compare that to the average down payment of 20 percent 20 years ago. Many factors play into how much you need to put down. There are special loans that require the borrower to deposit little or no cash. However, in today’s market it can be difficult to find a no down payment mortgage. Again, your circumstances will determine what you qualify for. If you are a veteran, you can probably qualify for a VA loan, but low down payment FHA loans are also available.

You can buy a home at just a 3.5% discount if you can qualify for an FHA loan. This is a very small deposit. The FHA loans used have relatively low ceilings, making them unattainable for buyers in expensive metropolitan areas. Recent increases to more than $700,000 in some geographic areas have made them accessible to nearly all first-time homebuyers. For first-time home buyers, this can be a perfect solution, considering that most first-time buyers may not have saved the 20% down payment. Mortgage insurance is often required when the borrower deposits less than 20%, depending on the loan program. Factor the cost of this mortgage insurance into your monthly payment.

Borrowers can typically cancel PMI once they reach a certain level of equity in their home. Again, this depends on your lending program, but is typically between 20 and 22 percent. Remember, lenders are legally required to cancel PMI if your equity reaches 22%. However, you can contact the lender and request cancellation of the PMI after you reach 20%.

Even if you could afford a 20% down payment, you can still opt for a loan with a lower down payment. Then you could use the extra money for other things, like debt consolidation, your child’s college education, or future mortgage payments.

What does all this mean for you? Use the available resources and you can open the door to your new home in this market too.