You’ve made that big decision and now is the time to purchase a new home. Where to begin and what to expect. Most would think that locating a real estate agent to work with would be the first step, but HOLD THE RAINES! There is another step that a fist time buyer needs to conquer first.
First Time Home Buyers Steps:
~ Shop around for the best deal on a mortgage. YES, shop around. Lenders rates will vary and sometimes you can get the lender to lower their origination fees. Decide which path is the best for your situation, a long or short mortgage. A longer mortgage means a lower monthly payment. Talk you’re your lender to understand all your options and the different types of loans available in your market.
~Get pre-qualified. You will need to provide your lender with the following:
~copies of pay stubs
~two to four months of banking statements
For those that are self-employed, you may need to provide:
~ a profit/loss statement
~a current balance sheet
~personal income tax returns for previous year
~Figure out your budget. There will be more costs to a buyer than just the down payment that ranges from 5-20% depending on what your lender requests and your personal circumstances. Additional costs to plan for may include:
~An appraisal that can range typically in cost from $300-$600. The appraisal will give you estimate of what the property is worth at a point in time and the bank will use the appraisal to be sure that the purchase price is in range with the appraisal price.
~Loan origination fees. A loan origination fee is what is costs to make the loan which covers processing fees, underwriting fees, points on the loan and origination charges. A lender origination fee usually varies between .05-1% of the loan amount.
~Inspection. This is a cost that is paid for by the buyer and ranges from $300-$500 based on property type and size. An inspection will inform the buyer of potential items that are wrong, hazardous or of concern with the property. A buyer will use this inspection to possibly negotiate with the seller to fix certain items. Buyers should remember that when purchasing a previously owned home, there will always be fixes that need to be done. Don’t make a seller made and lose your home because you are negotiating on minuscule items.
~Title Insurance. A buyer will want to purchase TITLE INSURANCE to protect them and the lender from title defects, liens or other issues that may appear on the home. This fee generally will be 1% of the loan amount.
~A Home Warranty. A home warranty will typically cover items such as appliances and systems should they need repairs or replacements. A home warranty typically will have a small co-pay, but a $100 or less is easier to come up with rather than the cost of a new furnace or appliance.
Now is the time to contact an agent and decide on a location and property type that will fit your needs now and into the future.