So, you’re thinking about buying a home. Congratulations! If you’re just getting started, with your permission, we’d love to offer advice! While this doesn’t cover everything, we hope it puts you in the right direction to get started. In this blog, you’ll find some of my do’s, don’t’s and helpful links:
At the very beginning of the home buying process, the first thing we recommend is to sit down with a mortgage lender. A mortgage lender can give you a great understanding of what kind of loan you qualify for, what your payments would be, how much you need for a down payment, and more.
- Do Ask as Many Questions As You Like: There is a lot to the mortgage process; we don’t expect you to understand or know it all. It’s our privilege to give you the answers you seek!
- Do Work With a Realtor: They are there to help you through the process! Find out more about why realtors are crucial to the home buying puzzle in this blog we wrote for you.
Mortgage lenders are there to help you! You will need to be prepared to talk in-depth about a lot of your financial history. Expect to go over your employment history, assets that may assist you in coming up with a down payment, and your credit history. Be honest with your lender so they can give you the best advice on how to move forward.
- Do Get Pre-approved: Pre-approval lets you know what you’re qualified to borrow (up to a certain amount of money at a specific interest rate). This way, you know that the homes you are looking at are within your budget. (It also makes it easier to put in an offer when you find a house you love).
- Do Review Your Budget: Understand what monthly payment you can afford. Having a budget written down to review with a lender will help you know your maximum affordable amount.
Things that may change the structure of your loan and cause you not to qualify for the same loan amount as before:
- Opening a new line of credit or increase balances on existing lines of credit. New credit lines could cause your debt to income ratio to increase.
- Closing trade lines may cause your credit score to drop, resulting in a higher interest rate.
- You are changing jobs. Your lender used the information on your application for approval.
- Changing bank accounts or moving funds from one account to another. Your lender needs to be able to document your funds. Changing statements could result in additional paperwork.
Once you’ve made an offer, how soon you close on your loan varies depending on the time of year and how extensive your mortgage is. But generally speaking, 30-45 days.
- Don’t Rush into anything – Buying a home can be exciting! But once you make an offer, that is a legally binding contract. Make sure you have taken the time to understand what is each piece of that contract. Again, ask all questions you have – your lender will happily explain or re-explain anything to give you clarity and comfort.
“Floating” rates: Your initial mortgage rate will be “floating” or subject to change as rates vary. Once you have an offer in on a home, your lender will help you decide when to “lock” that rate.
Rate lock: Your interest rate won’t change between offer and closing for a specified time frame (i.e., 30 days, 45 days, 60 days). This locked rate cannot change unless your lock period expires. Your lender will be beneficial at this time as they can identify the best time to “lock” your rate based on your local market’s trends.
Closing cost: Closing costs is the charges associated with closing your loan. Included in closing costs are things like your appraisal cost, your title insurance cost, setting up your escrow account, and a few other costs.
Down payment: The amount of money you are putting down on the purchase of your home (usually around 3.5%-5% of the purchase price).
- Mindful Money Tip: Don’t stretch your budget too far. Owning a home comes with other costs, so make sure to leave room in your budget to create a savings plan for your new home.