In “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers Part I,” we discussed the tax benefits of home ownership, HUD homes, buying a home with bad credit, home ownership for single parents and working with a real estate broker. In “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers Part II,” we’ll discuss down payments, loan qualification, working with Homestead mortgage and mortgage costs.
Many first time homebuyers are concerned about how much money they will have to come up with to buy a home. There are a number of factors that come into play including the type of mortgage you get and the price of the home you would like to buy. As a general rule, there are three costs you’ll need to cover. First, you’ll need enough earnest money. This is the deposit you make on a home to show the seller you are serious about wanting to buy the home. If your offer is accepted, this money is put toward your down payment or closing costs. Second, you’ll need enough money to make a down payment. This is a percentage of the cost of the home that you’ll pay when you go to settlement. Finally, you’ll need enough money for closing costs. These are the costs involved with processing the paperwork for your loan and buying the home.
The more money you put towards a down payment, the lower your monthly mortgage payments will be. Not everyone can afford to put 10-20% of the purchase price down. This is why FHA loans are ideal for first time homebuyers as they only require 3% down and in some cases less. When it comes to closing costs, Homestead loan officers provide you with an estimate so there are no surprises at closing.
First time homebuyers also want to know how they can get a loan. While some may be comfortable using online mortgage calculators to see how much they can afford, online mortgage calculators can’t direct you to a loan program that might be right for you. This is why it’s best to work with the loan specialists at Homestead mortgage who can get you pre-qualified for a loan long before you start looking for a home. There’s a peace of mind that comes with knowing how much you can afford to spend. Equipping yourself with this knowledge makes finding the home of your dreams easier and faster too.
Finding a lender is another concern for first time homebuyers. One of the reasons why so many first time homebuyers choose to work with Homestead is because of the company’s history. Since 1998, Homestead has been helping families to finance and refinance their mortgages. Homestead loan specialists take you through the mortgage process step by step.
First time homebuyers want to know the best way to prepare for home ownership and knowing about the other costs they need to consider in addition to the mortgage payment is essential. This is why working with a real estate broker is so important. A real estate broker can get information from the seller regarding the costs of monthly utilities, homeowner association or condo fees, property taxes as well as city or county taxes.
First time homebuyers also want to know what their mortgage will cover. Most mortgages have four parts. Part of your payment is the principal or the repayment of the borrowed amount. A second part is interest or the payment for the money you’ve borrowed. A third part is homeowners insurance which insures the property against loss from theft, fire, smoke or other hazards required by the majority of lenders. The fourth and final part is property taxes or the annual taxes assessed on your property by the city or county where the house is located. This figure is divided by the number of mortgage payments you’ll make in a year. Over the life of your loan you’ll pay less interest and more toward your principal until you pay off your mortgage and own your home free and clear.
In part three of our series, we discuss a few more loan tips and closing.