A version of this article was originally published on Cityhousecountryhouse.com on 9/20/2018
Find out what you can truly afford
There is so much more to buying a home than just being able to pay your mortgage. There are closing costs, lawyer fees, moving costs, possibly Home Owner Association dues and utilities…just to name a few. You also must ensure you have savings for all the little things that will come up.
Buying a fixer-upper or considering some renovations? You often hear about renovations going over budget and you have to plan for it. You can get estimates before the purchase of the home so you have a better understanding of what your costs will be like to renovate. Be smart! Add at least 10% more to cover unexpected issues and new ideas that come along.
If you plan to live in your home as is, something will still comes up. A professional Home Inspection can’t predict the future and unfortunately, something is going to break. Be sure to have enough savings for whatever might pop up those first few years.
Do not be discouraged, be prepared!
Even if you are just beginning to consider being a first time home buyer, begin with a visit (in person or online) with a Mortgage professional. They can help you see what you can afford and what programs you might qualify for as a first time home buyer. Our Berkshire Hathaway’s HomeServices offers “one stop shopping” with Prosperity Mortgage, HomeServices Insurance and Fort Dearborn Title. I can refer you to a local Mortgage professional who can discuss your true buying potential. I can also able to refer to other lenders outside of the Berkshire Hathaway network.
Research indicates that borrowers could save an average of $1,500 over the life of the loan by getting one additional rate quote and an average of about $3,000 for five quotes”. Shop around and see what you can find!
http://www.freddiemac.com/
First time home buyer programs
There are state as well as federal programs for first time home buyers. VA Loans (for those you have served in the military), FHA (Federal Housing Administration) loans, and even USDA loans for certain rural areas.
There are pros and cons to all these programs so do your homework and make sure you contact a mortgage professional to help you decide what will work best for you.
Some programs allow for lower down payments, even as low as 3% down. The days of needing 20% down are gone (although it is great if you can put that much down).
According to “a survey commissioned by NerdWallet, one in nine (11%) homeowners under age 35 agreed with the statement “I should have waited until I had a bigger down payment.” It was one of the most common regrets that millennial homeowners had.”
www.nerdwallet.com
What else can you do to prepare to be a first time home buyer?
- Know your credit score, check your report for errors and fix any mistakes
- Save a little extra each month for those pesky problem that will show up
- Begin to collect documents: bank statements, paystubs, W-2’s, 1099’s, and tax returns if your are self-employed
- Once you have secured your loan, don’t go on a shopping spree…the lender will check your credit again before closing
- DO NOT make any new big purchases — no cars, yachts, furniture or anything you might finance!
As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.” A little legwork now will help you achieve your dream home faster!