First-Time Home Buyers in Utah: What Are the Rules?

When you’re shopping for your first home, you may wonder what the rules are for first-time home buyers in Utah. You don’t want to make any mistakes or miss out on any deals for your first home mortgage. Don’t worry — trust the mortgage lenders at Integrity First Lending to help you through this uncharted territory.

Below, we answer some common questions first-time home buyers in Utah ask our mortgage lenders.

Can I Use My 401(k) to Buy My First Home?

Yes, there is no provision against borrowing money from your 401(k) to fund your down payment on your first home.

Experts explain that in a perfect world, using your 401(k) for a down payment is not the best financial choice. The good part about borrowing from your 401(k) to make a down payment on a home is that as you pay back your loan, you are paying interest to yourself. However, it’s hard to replace the losses you incur by not having that money in your retirement account for years.

Thus, if you can borrow from friends or relatives for your down payment, this is a better choice than taking money out of your 401(k). However, paying rent for years while you try to save up a down payment is also a financial drain, so in the end, this is a personal decision.

Can First-Time Home Buyers Get a Construction Loan?

Yes, if you own land, you can apply for a construction loan as a first-time home buyer. However, if you also need to buy the land and you are applying for an FHA loan, this usually must be done in conjunction with a construction loan. That means FHA will likely not approve a loan to buy land without a concrete plan to build a house on it immediately.

Currently, the FHA is offering a one-time close program, which means you only have to pay closing costs once for the purchase of the land, the construction loan and the conversion to a permanent loan. This can be a significant savings.

Can First-Time Home Buyers Avoid PMI?

PMI, or private mortgage insurance, is a monthly fee home buyers must pay if they do not put down at least 20% of the price of the home. It’s insurance against default, so these fees are nonrefundable. They are generally about $100-$200 per month. They must be paid until the homeowner pays on their mortgage long enough to reach the 20% mark.

Since home prices today are so high, many home buyers — first time or otherwise — end up paying PMI for a period of time. Home values in Utah vary greatly by county, but you would need a down payment of $60,000 on a $300,000 house to reach the 20% threshold.

While some mortgage lenders can help home buyers find a way around PMI, generally speaking, the only way to avoid it is by raising the money some other way, such as by borrowing from a friend or relative, selling something of value or taking a side gig to raise money quickly.

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If you’re a first-time home buyer, come talk to the mortgage lenders at Integrity First Lending. We can show you some mortgage programs that can help you buy the home of your dreams. Prequalify by applying online today.