By: Erin Jolly
Buy Your First Home – Even if You Don’t Know Where to Start!
Buying a home for the first time can be a scary, overwhelming process, especially when you have no idea where to start. Don’t be daunted by the leap into unknown waters! We are here to guide you through the entire process every step of the way. Learn more about the process of obtaining a mortgage, finding the perfect home, and making an offer. You will be on your way to home ownership in no time!
Understanding Your Mortgage
First off, let’s talk about mortgages. Most buyers need one, unless you have cash. There are a lot of mortgage options that vary from lender to lender and from buyer to buyer. It is important to understand exactly what you are looking for.
Types of Mortgages
There are four basic types of mortgages used by the majority of home buyers.
Conventional Mortgage: This is the standard loan used by buyers with good to excellent credit. The down payment must be at least 10%. There are programs that offer options for lower down payments based on buyer credit and location.
FHA Mortgage: These loans often apply to buyers with lower credit scores. The down payment is as low as 3.5% and offers lower interest rates. The catch is — FHA mortgages require mortgage insurance premiums, which can result in higher overall costs.
VA Mortgage: All veterans and active military members qualify for VA loans. This type of loan offers up to 100% financing, simplified loan approvals, and lower interest rates. These can actually be much lower than conventional loans.
USDA: These loans are available to buyers in rural or low-density areas and offer up to 100% financing and below market interest rates. The ideal buyer for this type of loan would be of average means, have lower credit scores, and buying a modest home.
What Do Mortgages Include?
There are four main components to a mortgage payment, often abbreviated “PITI.”
Principal: This is the repayment of the initial amount you borrow from your lender.
Interest: This is a payment to the lender for the money borrowed.
Taxes: Your annual city and county taxes assessed on your property are divided by the number of mortgage payments you make in a year and added to your mortgage.
Insurance: Your monthly homeowner’s insurance payment covers you against various hazards and is added to your mortgage payment.
Calculating Your Monthly Budget
Now that you know what loan options are available for you, and what you can expect to pay as a down payment, as well as what your interest rates will be, you can now better determine what you can afford on a per month basis. This will all be used to calculate the price range of your home.
*A home’s affordability can vary from one day to the next based on current interest rates*
Finding a Real Estate Agent
You don’t have to work with an agent, but it is highly recommended unless you are an experienced buyer or a lawyer. Your agent should be someone you can trust, and is an expert in your market.
Shopping Homes for Sale
Now it’s time for the fun part! This is where you get to decide exactly what you want and need in a home. Along with location and all the exciting interior and exterior amenities you just have to have! Taking pictures of the homes you view can help keep your memory fresh when trying to decide on one.
Making an Offer
You have found the perfect home, now what? It is time for you and your agent to sit down and discuss your offer. It is imperative you work together to determine a price you can comfortably afford but at the same time will be a realistic offer the seller would accept.
What Will I Pay Upfront?
Earnest Money: Think of this as your security deposit. It is paid when you submit your offer to show the seller you are serious. When your offer is accepted, it is applied to your down payment or closing cost. This money is also refundable should you retract your offer during your due diligence process.
Down Payment: This is determined by your loan, or any government programs or assistance you may have requested or qualify for.
Closing Cost: These are typically low for buyers and represent the fees associated with paperwork and lender charges.
Requesting a Home Inspection
Once the seller accepts your offer, it is time or a home inspection. Before you close, you will want to have an experienced professional walk the house to ensure that there are not any lingering problems or maintenance issues that may not be visible at first glance. If necessary, you can request the seller repair any issues you find.
Still Have Questions About Buying Your First Home?
We bet you do! Buying your first home is no simple process. Contact Us, and ask away!