Mortgage insurance: If you take out a conventional loan and put down less than 20%, it’s possible you’ll have to pay private mortgage insurance, which protects the lender financially. You can typically request for PMI to be canceled once you reach 20% equity in your home. If you take out an FHA loan, you have to pay mortgage insurance, though you may be able to cancel your insurance once you pay down enough of your loan.
Your inspector will provide a detailed report of everything in the home that could be repaired. Some of the items may not be a big deal, but some may be expensive or important repairs, such as the need for a new roof or HVAC system. You and your Realtor can request that the seller make some repairs, and the seller will have a few days to let you know whether they are willing to make the changes or reduce the price of the house. If the inspection uncovers major problems, such as termites or an unstable foundation, it can be your way out of a sales contract.
Once the property enters escrow, the purchase should be contingent upon it passing a home inspection. Once your offer is accepted, arrange to have an inspector visit the property and identify anything that needs to be fixed. Both you and the seller should receive a copy of the inspection report, after which you can renegotiate with the seller in case anything needs to be fixed. In worst cases, the contingency also protects you in the event that you would like to withdraw your offer.
Your agent may generally know which home you are going to choose, due to experience and intuition. However, make sure that you don't feel your agent is trying to steer you toward any specific property, and choose the home without interference from the agent because it's your choice as the buyer alone to make. Keep in mind, however, that real estate agents are required to point out defects and should help buyers feel confident that the home selected meets the buyer's stated search parameters.
Buying a home is exciting, especially when you're buying for the first time. In the midst of all of the excitement, it's easy to become blinded by beautiful back-splashes, granite and quartz counter tops, hardwood floors, and fenced-in backyards. While looking at homes that are completely perfect from top to bottom, you may begin to rationalize a larger purchase than you had originally planned for — "This house is perfect for me; it's worth $50,000 extra dollars for me to have a house with enough space in a perfect location," or "We were planning on spending a little bit of money on painting; we can spend $50,000 extra on this house because it doesn't need any work."
Homeowners insurance and property taxes: You’ll typically have to prepay homeowners insurance and property taxes at closing, and you should pay them on an ongoing basis as long as you own the home. The cost varies depending on your home and location. If you have an escrow account set up, these charges are rolled up into your monthly mortgage payment. But if you don’t have an escrow account, you’re in charge of paying them on your own, and you may have the choice of paying them monthly or annually.
In the end, more first-time buyers — 34 percent — were left feeling financially insecure after their purchase versus 17 percent of buyers who had done it before. First-time buyers are typically about 30 to 36 years old, according to NerdWallet. In 2017, there were 2.07 million first-time homebuyers, a 7 percent increase from the previous year, according to Genworth Mortgage Insurance.
Next, decide which mortgage makes the most sense for you. There are plenty of different options to consider. Although Gilmour advises choosing one of the most common two: a fixed-rate mortgage, in which your interest rate remains steady for the duration of the loan, or an adjustable rate mortgage (ARM), in which your rate fluctuates to reflect market changes.
In a seller’s market, experts advise buyers to overlook cosmetic issues, such as loose fixtures, water stains (as long as it’s not the symptom of a larger problem), failed window seals and cracked tiles. However, some buyers might be in the position to negotiate these repairs with the seller. One option is to ask for a cash-back credit at the close of escrow. This will save you some money and you can oversee the repairs yourself.
What's clear is that home buyers have options, and while the savings required to get a first home can climb to the neighborhood of $50,000, they can also come in around the mid-twenties. There are also assistance plans available from Fannie Mae and Freddie Mac, featuring 3%-5% down payments, and each comes with it own pros and cons. First-time home-buyers should also look into state and local plans. The research you invest in your process ahead of time can greatly affect what you have to save up before turning the key to your new front door.
As a first-time home buyer, you’re probably accustomed to the monthly cost of renting, which usually includes your rent payment, some of the utilities, and your internet and cable bills. As a homeowner, you’ll be responsible for additional monthly costs that may have been covered by your landlord. That includes things like water, sewer and garbage bills, monthly HOAs (if you’re buying a condo) and the cost of lawn care. You’ll also be responsible for paying property taxes and homeowners insurance. And don’t forget the cost of maintenance. It’s recommended that you set aside 1-3 percent of the purchase price of the home annually to cover repairs and maintenance.
Once negotiations have finalized, the contract has been signed and you’ve provided a small amount of cash as a deposit or earnest money, you’ll have a few days to conduct your due diligence on the property. That includes the home inspection, which will tell you if there are any issues with the property that could affect the amount you’re willing to pay or if there’s anything that should be repaired before you move in.
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Being under contract means you can still back out if you learn anything unexpected about the house. And a home inspector is the one who finds any potential surprises. It’ll cost around $300 to $500 for your home inspection, but it’s well worth saving you from buying a house with a major problem. Your agent can often help you find an inspector, or you can go through the American Society of Home Inspectors.
Getting pre-qualified for a home loan is a critical step in the mortgage process. Do so by approaching a mortgage lender or a bank and provide them with the necessary loan document information to get approved for a home loan. That includes your annual income, your household debt and your household assets -- and in some cases, your tax returns (especially if you own your own business.) Once you provide this information to a lender, they'll review your data and come back with a mortgage amount you're likely qualified to obtain. Normally, there is no cost to you for a mortgage pre-qualification, and you won't likely undergo a credit check -- not yet, anyway.
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Congratulations, you’ve made it! On closing day, your team (AKA you, your Realtor, lender, and attorney) will meet with the sellers and their attorney to make things official. Your lender or attorney will let you know in advance the total amount of money you’ll need to bring to the closing meeting for your down payment or any closing costs. Bring that amount in the form of a cashier’s check, then sit back and get ready to sign your name—over and over and over.
“Home loan documents” refers to the documents relating to the mortgage issued by the lender to you, the buyer. These documents include: 1) note, 2) mortgage, 3) loan application, and 3) Truth-In-Lending Disclosure (TILA). There may be other documents included. It’s always a good idea to read the documents yourself and consider having an attorney read them for you, too.
When you rent a home, you generally only have one payment — rent — and then maybe renter's insurance, which is optional. When you buy a place, your mortgage payment is only the beginning of an array of costs. Homeowner's association fees can be as low as $0 or as high as a few hundred dollars per month, depending on where you live and the amenities and services offered.
Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at [email protected]
So what is a good credit score? You can expect a good mortgage rate at anything above 720. Home buyers who pursue an FHA loan can usually secure a loan if their credit is 580 or over. FICO scores are available at www.myfico.com for a one-time or monthly fee. Once you know your score, you can find out what interest rate you will likely qualify for by researching interest rates on Zillow.
Now that you’ve found a home you want to buy, it’s time to agree on a price and sign a contract. Depending on the market you’re in, you might be able to negotiate with the seller on the price or extras, like appliances and other goodies. If there are multiple offers on the house, then your negotiating powers are all but nil. This is where you can rely on a trusted, knowledgeable real estate agent to guide you.