Tips for First Time Homebuyers
The thought of buying a home for the first time can be exciting, but the process and cost involved can also be overwhelming and downright scary. Seeking to purchase a home is an ambitious goal. There are a number of benefits to owning a home instead of renting. Most people finance their home’s cost by obtaining a mortgage through a lending institution. Before diving in to the process, first time homebuyers should do a little homework, complete some calculations and take a careful look at their budget, wants and needs before seeking a mortgage.
How much home can you afford?
Before you start touring homes, it’s important to understand how much home you can afford. Setting a number and sticking with it is important, so you’re not tempted to attempt to purchase a home well outside of your budget. Now is the time to examine your income, your debts and the down payment required for the type of loan for which you qualify. Many banks require that your monthly mortgage payments not be more than a certain percentage of your monthly income, but remember if you have recurring debts, those count against your overall mortgage eligibility, too. There are a variety of mortgage calculators available online to help you sort through the process and have a better understanding of what you can afford.
What are the down payment options?
No matter your income or credit situation, your lender will work with you to find a mortgage solution that best fits your needs. A variety of loan types are available which require different size down payments. Some require no down payment at all, but when considering options, be sure to look at other costs involved like private mortgage insurance or mortgage insurance premiums that can impact the overall cost of your loan. Some mortgages offer fixed interest rates while others offer adjustable interest rates that change over time. Special loans are also available for qualified military veterans and federally assisted loans may also be an option for those with lower incomes. Talk to your bank about the best fit for you, so you can have an idea of how much of a down payment to set aside.
Find the right home for you.
Now for the fun part…finding the right home for you. After you’ve figured out what can afford, there are other factors to consider: How big is your family? Where is your job located? Do you want to purchase a home near family, certain amenities or a select travel route? What kind of features are important to you? Do you need a fenced in yard? Do you require a garage? Would you love to have a swimming pool? And don’t be afraid to think long term. Does this house fit your needs today, but also match your future anticipated needs like space needed for a growing family or adjacent location to future schools. Make a list of wants and needs and then do a little online research to determine what homes could be a good match within your price range.
Find the right mortgage lender for you.
Everyone seems to have a suggestion regarding mortgage lenders. Your realtor may prefer a certain lender. Your parents may suggest a particular lender because they have used them before. While recommendations are good, it is important to find a mortgage lender that is the best fit for you, your budget and your situation. Mortgage quotes from lenders can vary based on your down payment, credit history, income, assets, debt and other factors. Fill out paperwork as completely and as honestly as possible to truly compare one lender to another.
Get pre-qualified for a loan.
The housing market can be competitive, and it is not uncommon for sellers to receive multiple offers, sometimes exceeding listing price. Being pre-qualified for a loan and having a pre-qualification letter available may make your offer stand out from other offers on your dream home. Being pre-qualified tells sellers that you are serious about your offer and ready to purchase. Buying a new home doesn’t have to be scary. With a little intentional planning and some careful research, you can be on the way to the home of your dreams. Take the time to examine you budget and consider other factors, and select a mortgage lender that’s the perfect fit for you. Before you know it, you’ll be enjoying your new home sweet home.
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