And remember: getting a mortgage is not a one-size-fits-all endeavor. Good news? Much of the shopping around can be done online. Companies like LendingTree and Bankrate have made it super easy and free! Some people only care about paying the same amount each month. Some buyers want to make sure they pay as little as possible over the lifetime of the loan. For example: If you plan to stay in your house for the rest of your life and care about paying the same price every month, a year fixed rate loan could do the trick.
Mortgage lenders require homeowners to carry homeowners insurance. There are a number of reasons for this, but the most important is that your lender will want your home rebuilt in case of catastrophe. There are a number of benefits to homeowners insurance for you — it provides coverage for:. In addition, it shields you from claims, fraud, and even unnamed heirs to your property. Why would you need that if you have homeowners insurance, you ask? Undoubtedly, this land has had many previous owners who could have open issues or outstanding claims against them.
So title insurance makes your home, well… yours! Your lender will give you the go-ahead to close assuming their underwriters have everything they need for your loan and make it official. Closing is the official transfer of the title on your soon-to-be home from the seller to yourself. Note: There are also a bunch of other fees associated with closing. Once you sign on the dotted line, the closing agent will hand you the keys to your very first home! You just bought your first home. Now you can go crazy decking out your place with stuff.
Well, not quite. After that, treat yourself. But do so in moderation. One big ticket item every two months might be a nice place to start. Hint: it has to do with visualizing your future self. Not only will keeping up with your monthly payments be good for your credit score, but it will also enable you to think about other big ger life events in the future, not to mention long term saving.
Adulting anyone? Lemonade explains the terms and concepts in your renters or homeowners insurance policy. This time, we tackle the question: what is a deductible? Got three minutes? Renters insurance is actually less than what you might spend on coffee each day. Lemonade explains the terms and concepts of your renters or homeowners insurance policy. This time, we tackle the question: who does your policy cover? Next Steps Give your finances a facelift Student loans, past due credit cards… been there, done that.
Start saving While banks will help you out with the majority of the payment when buying your first place, you still have to put down cash upfront, aka a down payment. Sound complicated?
The Ultimate Guide to Buying Your First Home
ARM loans usually have considerably lower interest rates than year fixed loans, saving you a lot of money. They may not save you that much on interest compared to a year fixed rate, but your monthly payments will be much lower with an ARM due to their year term. The downside? If you are still living in the home at the end of 5 or 7-year term, your mortgage rate will begin adjusting up or down with the market on an annual basis.
Your mortgage payment could rise dramatically throughout the life of the loan. This is why if you plan to stay in your home on a long-term basis, I would not trade the security of a fixed-rate loan for the up-front savings of an ARM. It never ceases to amaze me that people will often shop for a home for months, and will look at hundreds of homes before putting in an offer, and then will spend 5 minutes picking out their lender.
It makes no sense! But you definitely can. First, get online and look up lenders in your area that have good reviews. Make sure that they regularly get to the closing table on time. Then I recommend calling to get interest-rate quotes from FOUR of the companies that you identified as good choices. If this is your first home purchase, I also highly recommend that you choose a lender from the MCC Tax Credit approved lenders list. You give them your social security number, they run your credit, and…BOOM…you are now pre-qualified for X amount.
The loan officers work off commission and are notorious for giving pre-qualification quotes that are far too high in hopes of landing the client.
10 Steps to Buying a House - Home Buying Process
Why is this such a dangerous thing? This is why I recommend that you seek pre-approval with your lender rather than pre-qualification. With most lenders, you will need to provide more documentation to get pre-approved, such as pay stubs, and tax forms. But once the documents have been received and evaluated, your lender will pre-approve you for a particular loan amount and your loan officer will typically send you a pre-approval letter.
This is a nice letter to have with you when you make your offer on your home because it shows that you have done more up-front work than your average homebuyer. It can make your offer more appealing than others because the home seller knows that there is a high probability your offer will get through underwriting and make it to the closing table.
If during your initial phone call, a loan officer tells you that his or her company does not offer pre-approvals, I would keep looking for a different lender. Finally, ask the lender about closing costs and fees. After you put in an offer on a home, you will have a period of usually around 10 days to complete a home inspection. Home insurance companies will often require a four-point inspection to be performed on your home as a prerequisite for insuring the home.
This is especially common if you are buying an older home. A full home inspection is much more thorough and is the only inspection that technically gives you the right to back out of your home offer if it surfaces a problem. Can you just send your insurance company the full inspection report? I would not recommend this, even if you could.
The safest choice is to pay for both inspections separately. Your real estate agent will probably have a suggestion, but just know that reputable home inspectors will typically be members of one of these professional organizations: the American Society of Home Inspectors or the International Association of Certified Home Inspectors.
For this reason, I recommend that this be your first priority right after the inspection clears. I recommend that you call 3 or 4 different home insurance brokers in your area. Brokers make deals with insurance companies to write policies for them in exchange for a cut of the policy premium. This is why it is so beneficial to call more than 1 broker. In each state, there is usually 1 insurance company that offers the most affordable policies.
If the first broker you call happens to not have a deal to write policies for that company, then you will be quoted a premium that is too high. So we called up a broker that someone we knew recommended and went with the most affordable quote that he gave us. After our first year in the home, I decided to shop our policy around. Come to find out, our current broker did not write for the most popular and affordable insurance company in our state.
Getting Ready to Buy a Home
The homestead exemption rules vary widely by state, but all but four states Delaware, New Jersey, Pennsylvania and Rhode Island have some homestead exemption law in place. The deadline to file in most states is in March or April.
But once your lender receives the new and higher annual property tax bill, your mortgage will shoot up. Make a note of particular homes you are interested in and see how long they stay on the market. Also, note any changes in asking prices. This will give you a sense of the housing trends in specific areas. But you should make this determination based on your own financial situation. Before you start looking for a home, you will need to know how much you can actually spend. The best way to do that is to get prequalified for a mortgage.
To get prequalified, you just need to provide some financial information to your mortgage banker, such as your income and the amount of savings and investments you have. This will tell you the price range of the homes you should be looking at. Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable.
Start touring homes in your price range. You will see a lot of houses! It can be hard to remember everything about them, so you might want to take pictures or video to help you remember each home. Take as much time as you need to find the right home. Then work with your real estate agent to negotiate a fair offer based on the value of comparable homes in the same neighborhood. Once you and the seller have reached agreement on a price, the house will go into escrow, which is the period of time it takes to complete all of the remaining steps in the home buying process.
Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent usually will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller.