FIRST-TIME HOME BUYER
Buying your first home is a major decision; being a homeowner comes with many advantages. A mortgage payment combined with property taxes and insurance is often the same or only slightly more than monthly rent. And you will be building equity with each payment. Additionally, your payments will be offset by tax savings from mortgage interest deductions, which constitute most of the payment in the early years of a mortgage
One of the biggest hurdles in the first-time buyer’s purchase is producing cash for the down payment and buyer’s closing costs. But even this obstacle is not insurmountable. If you are a veteran, you may be able to obtain 100 percent financing through a VA loan. Most lenders offer financing with a low down payment. If your income enables you to qualify for the necessary mortgage loan, you may be able to negotiate a contract in which the seller pays your purchase closing costs and adjusts the price upward so that you, in effect, finance your closing costs. But, the loan appraisal will still need to support this higher value in order for the loan to close.
A good place to start the entire process is to visit a Prosperity Home Mortgage loan officer to “pre-qualify” and establish your maximum loan amount. (A loan officer can help you determine your affordability level, too, if you don’t mind sharing income and debt information). This loan maximum, coupled with your available cash, will determine the price range in which you should look. You may begin shopping by researching community features you want and need, remembering that “location-location-location” is as important as the home itself.
When shopping for a mortgage, look at the overall cost, not just the interest rate. Generally speaking, the higher the rate, the lower the number of points charged. Make sure you understand any hidden costs or special early payment penalties, which could create problems for you. Look at different mortgage products, such as shorter-term fixed-rate loans or adjustable-rate loans, but be sure you understand what your “worst-case scenario” is if interest rates rise.
WORKING WITH AN AGENT
Buying a home is usually an emotional decision and you need the counsel of a reputable, knowledgeable real estate professional who will help you buy wisely. As a first-time buyer, professional real estate assistance is crucial. You should insist that the agent work with you as a “buyer’s agent” to be your advocate in the transaction. In most cases, this agent is paid by the seller at closing so you will not pay extra to be represented by a good agent.
A good agent will help you evaluate the pros and cons of purchasing a single-family home, condominium, or townhouse, and what the various types of ownership mean to you. Should you buy a resale home or new construction, and what kinds of inspections or warranties should you seek in each situation? When making an offer, how much below or above listing price should you offer and how does the price compare to similar homes on the market? Are you negotiating terms and other costs (residential service contract, for example) as well as price? What do you do if inspections uncover needed repairs? Are there any factors related to the house or neighborhood which could create resale problems? What closing costs are considered typical?
Once you have settled on a community and seen several homes, the next step is to make an offer on a home you like. If you and the seller with the negotiating help of your agent come to terms and you execute a sales contract, you will then finalize your mortgage. You are encouraged to have a home inspection. You may have to coordinate your closing date based on when the seller can purchase another home and vacate.
Contact me for friendly, expert advice and helpful resources to assist you.
Marie Walton, CRS, GRI