Are you thinking about buying your first home? Embarking on the home buying process for the first time can be daunting and quite intimidating.
- Determine your long-term goals and how home ownership fits within those plans. What type of home best suits your needs? How long do you plan on staying in the home? All of these things should be considered when purchasing your first home.
- Determine your budget including mortgage payments, insurance, and other ownership expenses. Home ownership does not come without expenses, be sure to factor in all home ownership costs.
- Start saving for a down payment, if you haven’t already, and researching down payment options. Most mortgage lenders require a minimum 3% down payment. However, depending on the type of home, the reason for purchase, and your credit history a down payment could be between 5% and 20%. Saving for this large expense is important.
- Budget for closing costs. Closing costs are on average between 2% and 5% of the loan amount, which can be a significant expense. Closing costs are the fees associated with your home purchase that are paid at the closing of the real estate transaction. Closing refers to the transfer of title of the property from the seller to buyer. Closing costs can be incurred by either the buyer or seller.
- Start researching and considering your financing options, there are many options to choose from. Become knowledgeable about the different types of mortgages in addition to the standard 30 year fixed rate mortgage.
- Begin researching the neighborhoods you are interested in and consider hiring a realtor. What are the average prices of the homes in the neighborhood? Is there a home owner’s association? There is a lot to consider when it comes to the location of your home.
- Compare mortgage rates. It’s good to compare rates from several different lenders. Receiving several quotes can often lead to savings. Don’t only compare rates but also review the lenders’ fees.
- Get pre-qualified for a mortgage. Getting pre-qualified will give you an estimate of how much a lender may be willing to lend based on your current financial situation. Having a pre-approval letter makes you look like a more serious buyer to a seller.
These are just a few things to get you started. Home ownership should be carefully considered. It’s often one’s largest expense, so do your homework and research as much as possible.