Learning Center
First Time Homebuyers
Buying a home will probably be the most important purchase of your life, and the process can be intimidating. We are here to make it easy for you. This page outlines some of the basics you may want to know before getting started.
Renting vs. Buying
Renting: |
|
Advantages |
Disadvantages |
Usually costs less than buying |
No tax benefit |
You can usually relocate more easily |
No investment in or from property |
Little responsibility for maintenance |
No equity is accumulated |
No responsibility for repairs |
Rent amount may increase frequently |
Buying: |
|
Advantages |
Disadvantage |
Tax benefits |
Responsible for property taxes |
Greater stability |
Responsible for maintenance and repairs |
One of the best investments in today’s economy |
Monthly housing may cost more |
Your equity builds |
Cash is tied up |
First home often leads to a better home |
Can’t always sell a home quickly |
Pride of ownership and fulfills the American dream |
Less mobility |
Costs of Home Buying
How Much Money Do You Need? Enough to cover:
- Down payment
- Closing costs
- Other housing related costs: mortgage payments, maintenance, repairs, private mortgage insurance
When it comes to down payment and closing costs, you may have several options – including little or no money down loan programs. Furthermore, some loan programs do not require private mortgage insurance. Consult your Loan Officer for details.
Tips for the First-Time Homebuyer
Educate Yourself
Become familiar with the home buying process. You can do this fairly inexpensively by picking up easily understandable books such as Home Buying For Dummies. Also look for local free first-time homebuyer seminars in your area.
Save for the Down Payment and Closing Costs
Keep in mind that while minimum down payments start around 3% to 5%, the greater your down payment, the more favorable your terms. If you can purchase a home with at least 20% down, you won't need to buy private mortgage insurance (PMI). Also remember that closing costs typically range from 3% to 6% of the purchase price.
Determine How Much You Can Afford
Consider your other expenses, and make sure you are saving enough toward retirement and other goals when deciding how much to spend each month on mortgage payments.
Consider Other Home Ownership Expenses
When considering how much you can afford to pay each month, in addition to mortgage payments, factor in costs such as homeowner's insurance, property taxes, private mortgage insurance (if required), utilities, repairs, and maintenance.
Get Pre Approved for a Loan
You’ve made some estimates, but pre-approval will give you a more accurate picture of how much credit a lender is willing to extend to you. Knowing how much you can afford will help you and your Realtor spend your time more valuably, shopping for homes that are truly in your price range. Additionally, when it’s time to make an offer, pre-approval sends a message to the seller that you are serious and prepared to buy.
Location, Location, Location
Determine what neighborhood features and characteristics are most important to you and then research areas that meet your criteria. Consider factors such as safety, schools, convenience, community, and resale value.
Hire a Real Estate Agent. Get referrals from friends, relatives, and co-workers, and then interview several agents before you choose one. Choose a Realtor® who specializes in the neighborhood you’re interested in. Rely on your agent for guidance but don’t let them make decisions for you. An agent can let you know how much a home is worth, facilitate the sale process, and bring your offer to the seller's agent.
Inspection
Hire a professional Home Inspector. Get referrals from friends, relatives, and co-workers. Consult the Better Business Bureau as well. Be cautious about recommendations from your Real Estate Agent, as it is in the agent's interest that the Inspector not detect problems that could prevent the sale. Full Survey
A land survey may not uncover a disputed property line. And title insurance doesn't cover boundary line conflicts. A complete survey could save you lots of time, money, and frustration later on.
Closing Preparation
Get a closing costs estimate from your Loan Officer. Make sure you’ll have enough money for closing costs and down payment.
Choosing the Right Loan Program
With the wide variety of financing options available today, how do you know which loan program is the right one for you? Your professional Loan Officer and Tax Advisor can guide you in selecting a loan that will help you achieve your financial goals. However, answering a few basic questions may provide you with some insight into which loan programs are suited towards your needs.
How Long Do You Intend to Occupy or Own The Property?
Length of Stay In Property
|
Loan Programs to Consider
|
1-3 Years |
1 or 3-Year Adjustable Rate Mortgage |
4-6 Years |
5 or 7-Year ARM; 5 or 7-Year Balloon |
7 Years |
10 Year ARM; 15, 20, or 30-Year Fixed Rate Mortgage |
Would You Prefer a Lower Payment or More Rapid Accumulation of Equity?
Loan Programs to Consider |
|
Equity Buildup |
15 or 20-Year Fixed |
Minimize Payment |
1, 3, 5 or 7-Year ARM; 30-Year Fixed |
What Do You Feel Interest Rates Will Do in the Future?
Rise |
30, 20, or 15-Year Fixed; 7 or 10-Year ARM; 7-Year Balloon |
Fall
|
1-Year ARM |
Stay the Same |
1, 3, 5 or 7-Year ARM |
How Well Do You Tolerate Risk?
Loan Programs to Consider |
|
Uncomfortable With Vulnerability to Interest Rate Fluctuations |
15 or 30-Year Fixed; 10-Year ARM |
Comfortable with Market Changes |
1, 3, 5 or 7-Year ARM; 5 or 7-Year Balloon |
Newsletters
- Mind Your Money
Monthly newsletter regarding family money matters. - HomeLine
Monthly newsletter offers helpful advice and interesting news about your home. - Economic Update
Weekly newsletter keeping you in the loop about economic news affecting the real estate industry.
