First-time Home Buyers: 5 Pointers when Buying a Home
April 19th, 2017
April 19th, 2017
The home-buying purchase process can be complex and confusing to navigate, especially if you’re a first-time home buyer. But buying a home can be rewarding. Before you start the process, consider these tips to help you do it the right way – and possibly save some money.
1. Time Your Purchase
There’s more to buying a home than just having a desire to own a home. You must be ready to buy a home, too. Therefore, timing is an essential part of the process. While your lease may be expiring in 30 days, a month isn’t enough time to look for and purchase a house. Likewise, if you can’t get out of your lease for 6 months or more, now is probably not the time to start the process either. You must have realistic expectations and be ready to make an offer when the time is right – and wait when it’s not.
2. Save for Expenses
Most people know they must save for a down payment. Depending on the type and size of your mortgage loan, you may need to make a down payment of 3.5% to 20%. But you may be surprised to learn that you need more cash than just for a down payment. If you can’t make a down payment of 20%, you may need to pay for private mortgage insurance, too.
Additionally, you’ll need to cover your closing costs. These costs cover various fees incurred during the mortgage process, such as an application fee, appraisal fee, closing or escrow fee, etc. Typically, closing costs range from 3% to 5% of your loan amount.
Also, your lender may require you to have a certain amount of cash reserves in the bank to cover future mortgage payments. Depending on your lender, this cash reserve requirement can be for 1 to 6 months’ worth of mortgage payments.
Other expenses you need to save for include:
- Moving expenses
- Homeowners insurance policy
- Homeowners association dues, if applicable
- Appliance and furniture purchases, if needed
- Utility adjustments
- Home renovation and/or maintenance costs
Therefore, you need to plan for these expenses and cash reverses in addition to a down payment. We suggest creating a savings plan and sticking to it before you purchase a home.
3. Plan to Stay in Your Home 5 to 7 Years
If you’re only planning to stay in your home for less than five years, you’re not going to break even financially. So, don’t buy a home unless you can stay in it for more than five years.
4. Get Preapproved for a Mortgage
If you need a loan to buy a home, talk with a mortgage professional like those at Grandview Lending in Indianapolis to get preapproved for a mortgage. During the preapproval process, a lender looks over your financial information. The lender will tell you how much you can afford to borrow and how much they will lend you. Therefore, you won’t waste your time looking at homes you can’t afford. Plus, preapproval gives you credibility when you finally make a purchase offer.
5. Shop Wisely for a Mortgage
As a first-time home buyer, you have a wide variety of mortgage options available that you can choose from. However, if you work directly through a lender, such as a bank, they may not offer you many loan selections. That’s why you should work with a mortgage broker like Grandview Lending. Our mortgage specialists have access to many different mortgage choices. And we will work with you to find the right mortgage solution based on your individual needs. Contact Grandview Lending today at 317-255-0062 to learn how we can help you make the best possible mortgage decision for you and your family.
Photo credit: iStock
We provide our clients with exceptional service and integrity which has become our hallmark.