Make your home buying experience successful and enjoy home ownership more.
Author: Lisa Novak
Everyone wants to get in on the action of securing low mortgage rates and getting into their first home. The market is attractive for buyers these days, but buying and owning a home is very different than renting. Knowing these five things as a first time homebuyer can make the home buying experience more successful and home ownership more enjoyable.
Choose The Lender Before The Home
One of the first mistakes most first time homebuyers make is not thinking about financing until after they have already found the house of their dreams. It is a better practice to research and choose the lender first.
When shopping for a lender, it’s not only important to shop around for good rates, but also a lender who is knowledgeable and can offer various loan programs to best fit the buyer’s needs. Other things to compare include charges for closing costs and their loan process turn around time. Though both are often an estimate, it will provide good insight of what to expect.
Once a lender is chosen, the next step is getting pre-approved. The benefits of being pre-approved include the buyer knowing what they can afford before they begin their house hunt and a better idea of how much money to save. It also allows time for the buyer and lender to review various loan programs available and any purchase limit that may be part of those programs. Being pre-approved also can be a great bargaining chip if the seller has multiple bids.
How Credit Works
Often times people don’t understand, know, or check their credit reports. Buyers do well when they take the responsibility and time to get to know more about their credit. Having good credit versus bad credit could be the difference in getting a better rate and having more program choices available.
One of the biggest mistakes buyers make is applying for credit during the home buying process. Furniture purchases with attractive financing such as 0% down and no payments for two years, will still count in debt payment ratios. Sometimes this simple mistake can derail the home buying process. It’s better to wait on all large credit purchases until after the final mortgage loan papers have been signed.
Save More Money Than You Think
Many first time homebuyers don’t save enough before they buy a house. Many just save enough for down payment, often forgetting the other costs associated with buying a home and costs once in the home.
During the process of buying a home, there are a number of other things that home buyers often pay for. This includes not only the down payment, but also closing costs which can include inspection and appraisal costs, title work fees, and escrow deposit.
Sometimes, sellers are willing to pay the closing costs or offer the buyers credits. Though that scenario is a big advantage, the downpayment by the buyer is still required. It is important to be fully aware of all costs associated with the purchase process.
There are also home startup costs. This would include saving enough money for any repairs, furniture, cleaning supplies, window treatments, moving costs, lawn maintenance equipment, etc.
Other expenses associated with home ownership, such as water, electricity, heat, sewer, garbage removal, cable and internet are ongoing. Having a monthly budget and understanding what those costs mean to the budget is key to owning a home, instead of a home owning you.
Repairs: After Moving In and Beyond
Home repairs can derail a homeowner’s budget quickly. It is a good idea to make the written agreement of home purchase subject to passing a home inspection. In addition, the buyer may also be able to negotiate with the seller to pay for a home warranty. These warranties cost the seller on average $300 - $800 and cover mechanical breakdown of major appliances, plumbing and heating and cooling components.
Once the purchase agreement has been negotiated, it is time for a home inspection. When choosing a home inspector, it is better to get a thorough and timely inspection from an experienced professional than to choose an inspector based solely on price of services. Their job is to point out to the homebuyer and lender anything that was, is or could be an issue in the home.
The financially savvy homeowner will continue to save money to budget for future repairs. Not everything will be found in the inspection and not everything will be covered by the warranty. Saving for just such occasions, prevents going into credit card debt when a repair expense arises.
The Lengthier Financing Process
The steps and time involved in the process of home buying are lengthier than when purchasing a car. It’s a big purchase for the homebuyer and a large risk for the financial institution. The whole process, once a rate is locked in with the lender, can take 30-45 days.
A big piece of this process is the verifying and documenting the information provided on the loan application. This includes employment, income, timelines of payments to the current landlord, savings, and debt. Buyers may be asked to provide w-2s, tax returns, bank statements, and any sources of large cash deposits.
Other steps involved in the timeframe include the home inspection, termite inspection, appraisal and title work coming back without any issues that would stop the purchase.
To learn more about buying a home, as well as other financial topics, be sure to visit our web site at http://www.decu.com/Balance/.