Buying your first home is not something you (or anyone) should take lightly. You should be prepared with as much information about the process as you can learn before you begin. You should understand your real estate market and the current mortgage market. The more you know – the better.
How Much Home Can You Afford? As a first-time home buyer, it’s important to have an accurate idea of how much money you can borrow for your new home and most importantly, how much you can afford. Sometimes those two aren’t exactly the same (depending on your financial situation), so always use what you can afford as your main metric for deciding how much house you should mortgage. One of the realities of first-time home buying is the frustration of finding that perfect home only to discover that it is not in your price range. Finding out how much home you can afford is actually not that difficult. Your mortgage banker will help you.
Should You Get Pre-Qualified or Pre-Approved? Often a mortgage lender will tell a potential buyer they are “pre-qualified” for a loan. This can confuse first-time home buyers, who think they will qualify for that amount. Not likely. With a pre-qualification, little information about your finances is verified (often none). You might find out later that the amount you were “pre-qualified” for is far different than what you actually will qualify for (or even afford). What you need is a “pre-approval” in which more information (your credit and other factors) is checked and you can have a better idea how much you can afford for your first home. With a pre-approval, you’re in a better position to negotiate because the seller knows that your offer is more solid. You’ll avoid wasting time looking at homes outside your price range.
What Kind of Mortgages Should You Consider? For first-time home buyers, mortgages can be confusing and a bit overwhelming. Ask your mortgage banker every question you can think of. There are no dumb mortgage questions, especially for first-time home buyers. A good mortgage banker will ask you numerous questions about your specific financial needs so that they can match you with the best mortgage.
The mortgage best for you will depend on:
- Your current financial situation
- Whether or not your financial situation will change in the next few years
- How long you want to stay in your home
- If your income is steady or fluctuating
What Documentation Do You Need? Almost always, you’ll need these items to complete your mortgage application:
- Pay stubs
- Bank and/or other asset statements
What Are Closing Costs? This is probably the top asked question by first-time home buyers. All mortgage lenders are required by law to disclose in writing your estimated closing costs and fees, so you’ll know ahead of time. If you don’t get this from your mortgage lender, you know something is wrong. Back out before you waste any money. This estimate is commonly called a “good faith estimate.” Keep in mind, various additional costs might apply depending on your state, mortgage type, and down payment amount. For instance, title companies handle most closings, but there are some states that require an attorney to conduct the closing. In those states, borrowers are not required to pay a title company closing fee.
Before your closing, you’ll receive a document that outlines the actual costs you’ll pay at closing. You’ll be asked to bring a valid picture ID, a certified check (if applicable) for any down payment due (or you may have to wire the money to the title company) and any other additional documents that your circumstances may require.
Be sure to ask for and to take a final walk through of the property shortly before the closing to make sure the home is in the condition you expect it to be.
Any number of people may attend the closing—you, your lender, the seller, the seller’s mortgage holder, respective attorneys, the real estate agent, the transfer agent (if it’s a co-op), the managing agent (if it’s a condo) and the title company representative. Once everyone signs the appropriate documents and the checks are exchanged, you’ll be given the keys to your home and that’s it!
So there you are! As a first-time home buyer, you’re on your way to being better prepared for getting a mortgage and buying your first home. Don’t take chances. Do your research and ask lots of questions
My name is Lisa Longest and I work with Exit Gold Realty. My goal is to work with people to help them build the lifestyle they want. I help them make decisions that will change their lives for the better. So feel free to contact me to get more information on homes for sale or to help you sell your existing home at 443-786-4200 or email me at LisaLongest@ExitGoldRealty.com