I will be doing a four part serious called, "How to Tackle Buying as a First Time Home Buyer". As promised, here is Part 2 of my Tips for First Time Home Buyers:
7. Budget for closing costs
Often people assume they only need to save for a down payment. You will need to also have a budget for money required to close on the purchase of your home. Generally, closing cost can run between 2%-5% of your total loan amount. Certain closing expenses can be found cheaper and you have the ability to compare for example; homeowners insurances, home inspections and title searches. When you establish your home buying budget, ensure you take some time to work through your calculations for your closing cost.
8. What type of home do you want to buy?
When you are ready to purchase a home, think of all the amenities you would like to come with the home. A single-family home could be perfect if you want a large yard or additional space. But, maybe a condo seems more attractive in order to forego yard work and less maintenance. With a condo you must now consider the additional cost related to home owner association fees. Ensure you have considered all factors prior to putting in your offer on your new home.
9. Research mortgage options
There are so many mortgage options, so make sure you do your research. Determine your affordability for monthly payments. The larger your monthly payment the more likely you will have a lower interest rate and possibly a shorter loan term (20-year to 15 year) rather than the traditional 30 - year. There are several calculators online to help assist you in determining the right combination of rate to payment for you and your budget Mortgage Calculator . There are other options such as an adjustable-rate mortgage, which can be a tad riskier but guarantees a low interest rate for the first few years of your mortgage.
10. Get a preapproval letter
One of you’re the first steps in your journey after determining the type of loan, you must get prequalified. This is a simple step where you provide some basic information to the lender of your choice and they in return provide an estimate of how much the lender may be willing to lend based on your income and debts. The closer you get to purchasing your home, you will want to start this process underway so that when you are ready to put in an offer to a home you will appear to have true intent and appear to be a serious buyer to the seller. In this market many sellers will not accept offers without a preapproval letter. This is a step you don't want to miss.
Checkout next week's blog post for more steps to help you tackle your first home buying experience.