Congratulations! Buying your first home is very exciting and a major milestone in your life. While it is a big investment, it is also your first step toward creating wealth and security for you and your family. We’re committed to making your first time home buying experience the best it can possibly be. As dedicated mortgage professionals we believe that each and every one of our loan transactions is the beginning of a relationship that will last a lifetime. Here are 10 insider tips to help you get started on this exciting journey!
1. Location Data
Have you decided where you want to live? Maybe you want to live in a neighborhood with an award-winning public school system or somewhere near where you work. If you’ve got your eyes on a couple of areas, before you get too much further, check out what homes are selling for where you’d like to live. This will give you an idea of what you can expect to pay and ultimately how much you’re going to borrow.
2. Total Costs
Once you have an approximate loan amount you’ll want to know what your payments will be. At this stage, you should be working with a loan officer who can provide you with multiple financing options. But beyond the mortgage payment, there is also an annual property tax bill and homeowners insurance. In addition, remember there will also be monthly expenses such as your water and electricity bill.
3. Speaking of Costs
Your loan officer will also provide you with an itemized list of potential closing costs you’ll see at the settlement table. This includes both one-time and recurring charges. One-time charges include lender fees and title insurance for example. Recurring charges are interest, taxes and insurance. Add these figures to your down payment amount.
4. Are You Comfortable?
Lenders determine affordability by comparing total monthly payments with gross monthly income. If your house payment exceeds 33 percent of gross monthly income it might be a little uncomfortable. Concentrate more on what you’d like your payments to be each month and less so on the most you can borrow.
What about local real estate data and demographics of the area you’ve chosen? Does it look like the neighborhood is thriving or the other way around? Look at the physical condition of houses in the area. Areas with several vacant homes for sale can indicate a neighborhood in decline.
6. How’s the Credit?
You’ve probably got a pretty good idea about your credit profile. But have you literally checked your credit report? While you’ve been making your payments on time it’s possible there are mistakes in your file that can hamper credit scores.
7. Loan Prep
Your loan officer will provide a list of documentation you’ll need to provide. This includes information about your income, employment and funds to close. This means your pay check stubs covering 30 days, W2 forms, bank statements and tax returns if you’re self-employed.
8. Looking Beyond
This will be your first home but it won’t be your last. First time buyers historically buy their next home within about seven years. Look at your situation and get an idea regarding how long you plan on keeping this first home. This will impact the types of loans your loan officer will present.
9. Don’t Get Pushed Around
When word gets out that you’re thinking of buying a home, you’ll get your fair share of advice both from industry professionals as well as friends and family. But one thing to remember, you’re the boss here. Don’t get pushed around and if it gets a little overwhelming, just pull back and exhale. There’s plenty of time to buy.
10. Have a Little Cash Left Over
Finally, don’t empty your bank account. Lending guidelines will ask there be some funds left over after all is said and done. These funds are referred to as “cash reserves” and counted as how many months’ worth of house payments you have left over after closing. If your total mortgage payment is $2,000 and the loan guidelines ask for three months of reserves, your lender will need to see evidence of $6,000 after your down payment and closing costs have been paid.