Maybe you finally landed the job that allows you to have new financial freedom. Maybe you had to move and decided it was time to get out away from rentals and roommates. Whatever the case, you are ready to be a homeowner, and that’s great news!
But, what do you do next? The thought of owning a home for the first time puts a smile on a lot of faces, but the process can be intimidating, overwhelming, and frustrating at times. At Honor Credit Union, our team of mortgage experts are here to be your guide from start to finish – bringing you home, effortlessly!
We’ve put together 6 tips to help you on your journey as a first-time home buyer:
Review Your Credit & Set a Budget
Knowing your credit score is crucial for securing the best interest rates and determining your purchasing power. Honor members have free access to their credit score in Online Banking. Another option is www.annualcreditreport.com, which gives you one free copy of your credit every 12 months.
Once you know your credit score you can start crunching some numbers to determine what you can afford. For an accurate figure, work with your lender for a pre-approval letter. Honor offers convenient online tools like rate checking, calculators, and checklists.
Tip: Look for a home that costs about two-and-a-half times your gross annual salary. Significant debt and expensive hobbies can affect that number. Another rule of thumb is that your home payment should not exceed 36 percent of your gross monthly income.
Note: Leave room in the budget
In your planning, don’t forget to consider a down payment and closing costs. What does closing cost include?
- Appraisal fee
- Loan fees
- Attorney fees
- Inspection fees
- Title search
Start House Hunting
Like any big purchase you make, it’s important to shop around and do your homework. The first step is to figure out where you want to live. Consider the neighborhood, the town’s economic outlook, and the school district among other things. One rule of thumb is to not be too restrictive in your search and look a little above and below your price range and just outside your target area.
Make An Offer
Navigating the process of making an offer on a home is indeed an exciting step in the journey of homeownership. To have a compelling offer, leverage your realtor’s expertise to gather data on recently sold houses in the same neighborhood. This information will help you understand the market value and guide your offer.
While it’s natural to want to secure the best deal possible, avoid lowballing the seller, as it may lead to rejection and potentially sour the negotiation process. Instead, aim for a fair offer that reflects both your budget and the property’s worth. Remember, your bargaining power fluctuates depending on the market’s pace. In a sluggish market, you have more room to negotiate, whereas in a competitive market, your leverage may be limited.
Connect with your Mortgage Lender
Once you have a signed offer, it is time to call your MLO. From here our local expert will talk rates, term, loan amount, and other steps to getting you on the road to your home.
After putting everything in place with your lender, it’s advised to schedule a home inspection. We recommend asking to be present during the inspection because you will learn about your new home and its condition. If major problems are discovered, you will have to negotiate with the seller to either fix the issues before moving forward or discuss a lower price. If both parties can’t come to an agreement, you can walk away from the agreement if that is written as a contingency in the contract.
It’s also a good idea to make a “good-faith” or earnest money deposit. It ranges from one to 10 percent of the purchase price and should be deposited into an escrow account. The seller will receive the money after the deal has been closed and if the deal falls through you will get the money back. This lets the seller know you are serious about the purchase.
Inspection is Complete, Time to Order the Appraisal
Once you are satisfied with the home inspection, it’s time to call your MLO at Honor who will then order the appraisal, title work, and the loan will undergo the next steps!
This is also a good time to research a homeowner’s insurance policy as lenders typically require you to have one in place.
Closing Time
A few days before the actual closing you will receive a final document from your mortgage lender that lists all charges you can expect to pay at closing. Make sure you read everything carefully to avoid any surprises. Some closing costs you will likely be responsible for:
- Down Payment: This can range between 3 and 20% of the purchase price, depending on the type of mortgage used. This is an upfront payment for the mortgage. With an FHA or RD loan, borrowers aren’t required to put any money down, but you will need to set aside money for closing costs and escrows.
- Escrow: You may be required to prepay a certain amount of taxes and insurance costs so your lender can pay these bills on your behalf when they’re due.
- Homeowners’ Association Dues: Many homeowners associations require a year’s worth of dues when you move in.
- Third-Party Fees: Appraisal, title insurance, closing fee, and courier fee are some things you may have to pay for at closing.
Ready to get started or have questions?
One of Honor’s local mortgage lending experts would be happy to help you unlock the front door of your first home! And at Honor, you have the option to do everything in the way that best fits your schedule or preference. When you visit us online at honorcu.com you can utilize helpful info like checking our current rates, using our calculators, and downloading a checklist to make sure you have everything lined up.
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