Advice for First-time Home Buyers

If you are looking to purchase a home and this is the first time, you probably have more questions than answers. Here is some advice that should help you get a mortgage for the home you want to buy.

Research Mortgage Options:

There are different types of mortgages, by researching these options you can find one that is best for you. As a new buyer, you are excited and anxious to move into your new home but research first to make sure you are getting the best deal for you.

Know Your Credit Score:

Not knowing your credit score could lead to being turned down for a mortgage. As soon as you decide to look for a home, check your credit score with the three major reporting agencies:

• Experian

• TransUnion

• Equifax

If you find mistakes that need to be corrected, you need to take care of them in a timely manner. You will be in a better position when you buy a home. Many banks will provide their customers with a free FICO score Online and through their Mobile Banking.

Find A Good Lender:

You need to find a lender who will listen to you and put your needs first. They should be able to explain your loan options in simple terms that you can understand. Interview a few before making a decision in order to get the best fit for you.

Get Prequalified First:

You should know how much home you can afford ahead of time. Once you know how much you can borrow, you can focus on finding the perfect home for you. Many institutions will help you find out what you can afford and in many cases, your realtor can help you out.

Understand Your Budget:

Sit down and figure out the monthly payments you will be making and whether the home you are considering is in your budget. Once you have calculated the cost, get with your lender and discuss this amount Understanding if you can meet your future home payment is the most important step in becoming a successful homeowner.

Understanding PITI:

PITI stands for principal, interest, taxes, and insurance. All these factors must be included in your budget. When you look at a mortgage calculator, it will show you how much you will pay toward the principal and interest each month. That said, you must also include the cost for property taxes and homeowner's insurance that are mandatory. Some lenders will require you make these payments monthly along with your principal and interest payments. Talk with your lender to find out what you will actually be paying each month.

How Much Cash Will You Need At Closing?

You will be required to put down a certain amount of cash for a down payment. If you are working with a realtor, they will be able to tell you what the cost will be. Down payments are usually somewhere between 5% to 20% and in some cases more. Keep in mind, if you put down less than 20%, you will be required to get private mortgage insurance Closing costs are around 3 to 7% of the total amount which will include loan origination fees, title insurance, and appraisal fees.

Your Private Mortgage Insurance:

Usually, conventional financing, PMI is necessary if you put down less than 20% for the down payment. You need to know how much it will cost and then factor it into your monthly home payment budget.

Find Out What Your Utility Costs Will Be:

This is very important especially if you are moving into a home for the first time and have been living in an apartment. Also, if you are moving into an older home or a newer home, the climate you are moving to. Your bills will vary from hotter climates to colder climates and what time of year will have higher rates. Talk with your realtor, in many cases, unless it's a new home, the previous owner will provide this information to your realtor. Keep in mind, Realtors know their areas of service and usually know approximately what your costs will be.

Miscellaneous Expenses:

Take in to account your moving expenses and additional maintenance costs. If you are buying a new home, your maintenance will probably be less than an older home. Either way, all homes require upkeep. If you are buying a home or condo with a homeowners association (HOA), include their dues in your budget. Budget in money for emergencies should an unexpected incident occur such as medical bills or a loss of wages.

Manage Your Debt Carefully:

Keep in mind, your home might need new appliances, a new roof, or landscaping. If you are moving into a new home, landscaping can be pretty sparse. Not managing your debt is one of the most common reasons homeowners will miss their mortgage payments. Do Not overextend yourself with credit cards and other debts, adding to your budget.

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