There’s no doubt buying your first home can be a little intimidating. It’s certainly a big commitment and even though you’ve read rent vs. buy articles convincing you buying is better, it’s still no small decision. And that’s okay! All homeowners can remember when they bought their very first home. Suddenly there were new terms bandied about, multiple parties involved, tax returns, paycheck stubs…it can be a bit overwhelming. But knowing in advance what to expect can be a big help. If you are thinking of buying, here are five questions you need to ask yourself to help get you across the finish line.
HOW MUCH MONEY DO I NEED?
Most loans need some sort of down payment. There are a couple of programs reserved for veterans and rural properties but otherwise, you can expect to make a down payment at the settlement table. FHA loans need a 3.5 percent down payment and there are a couple of first-time buyer programs that need just 3.0 percent down. You can put down more but that’s the minimum. In addition, there will be closing costs involved. All mortgages need various services performed by third parties. Your loan officer can provide you with a list of expenses you can expect.
HOW MUCH CAN I QUALIFY FOR?
This is determined by your gross monthly income, current debt, and current mortgage rates. The most common loan issued today is the standard 30-year fixed. When determining how much you can borrow, typical loan guidelines like to see your mortgage payment be somewhere around one-third of your gross monthly income. This can vary slightly but it’s a good rule of thumb.
AM I READY FOR MAINTENANCE COSTS?
Once you close on your loan, the property is all yours. That also means if something needs your attention, there’s no landlord to fix it for you. When renting and the dishwasher goes out, you called your landlord or the property manager who would send someone out to fix it at their expense. When you own, it’s your expense. You’ll want to get a complete home inspection before you close on any home to get an idea on the condition of the property as well as current appliances.
WHERE DO I WANT TO LIVE?
Okay, now that you’ve got an idea of how much you can qualify for and about how much money you’ll need at your closing, you need to figure out where you want to live. Much of this is determined by how much you’re qualified for. Most want to live near their work for an easier commute. Others like to live in an urban area and enjoy the city lifestyle.
DO I NEED AN AGENT?
Short answer? Probably. Real estate agents buy and sell homes full time. Experienced agents can take your qualifying data and identify parts of town where you might want to live. An agent is a skilled negotiator and can tell you what is and what might not be a very good buy. One thing many first-time buyers don’t realize is all this experience from an agent is essentially free. It’s the sellers who pay your agent’s commission, not you.
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