The decision to buy your first home is one of the biggest financial steps you will ever take. Buying a home is a major financial decision, and it takes some planning. The first-time homebuyer should be prepared for the costs they will incur. In addition to the purchase price of your new home, there are other financial obligations that will go along with homeownership.
Down Payment Requirements
The amount required for a down payment will vary depending on the type of mortgage you obtain. For instance, for an FHA loan, it may be 3.5%. For a traditional loan, requirements will be approximately 20%, according to this first-time home buyer’s guide. For a $300,000 home, a traditional down payment requirement is $60,000. The amount of mortgage that you qualify for can help determine how much you can, or you should be, spending on your new home. You will first want to make sure you meet the qualifications to get a mortgage before you begin your home search.
There are a variety of closing costs, including attorney fees, that should be factored in as you budget for your home purchase. This article discussing closing costs explains that most closing costs range from around 2% to 5% depending on the circumstance. These are usually broken down into smaller sections, which you can go without paying if you do many of the things yourself. The buyer is responsible for the home inspection, the appraisal, termite inspection, and other related costs that could come up. A mortgage broker or banker will look at your monthly expenses versus your gross income. It is a good idea to pay down as much other debt as possible before applying for a mortgage. Not only will your credit score improve, but your income to debt ratio will improve, too. The higher credit score can help you obtain a better interest rate. Therefore, make sure you meet the qualifications to get a mortgage with the best terms.
Get Pre-Qualified for a Mortgage
Applying for a loan these days can be accomplished online. Whether you seek to obtain a mortgage from a bank or a broker, they will request backup documentation. This article says that the most common documentation you need is pay stubs, credits reports/scores, tax documents, proof of employment, and more. A fixed-rate mortgage assures you of a monthly payment that will not change for the life of the loan. Reversely, a variable-rate mortgage will fluctuate because the interest rate will adjust your payments. Other types of mortgages include VA, FHA, 15-year fixed, balloon, and more. Some like VA Loans can be acquired even with bad credit but come with some requirements. Make sure you always read the fine print.
Please make sure you meet the qualifications to get a mortgage, and then learn more about the pros and cons of each type of mortgage. Determining how much you can afford will put you on the path to becoming a first-time homeowner.
If you want to buy or build a home, keep The Evangelisti Group in mind!