In “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers Part II,” we discussed down payments, loan qualification, working with Homestead mortgage and mortgage costs. In this article we’ll discuss what first time home buyers should take with them when they are ready to apply for a mortgage, how to determine which mortgage is best for you, how much to offer when you find the home you want, what to do if your offer is rejected and what to expect at closing.
Applying for a Mortgage
When first time homebuyers are ready to apply for a mortgage they can save a good amount of time if they bring everything they need with them to Homestead. Be sure you have your social security numbers for you and your spouse with you. You’ll also want to bring copies of your statements for your savings and checking accounts for the past six months; evidence of financial assets like stocks and bonds; recent paycheck stubs that will detail your earnings; a list of all your credit card accounts with the monthly amounts owed on each, the account numbers for car loans and any other loans along with the balance, your income tax statements from the last two years and the name and address of a person who can verify your employment.
With so many different types of mortgages out there it’s difficult to know which one is best for you. This is why it’s ideal to learn as much as you can before you start the process. Many first time homebuyers use a fixed-rate mortgage, a mortgage where the interest rate remains the same for the term of the loan. This is typically 30 years. The benefit to having a fixed-rate mortgage is always knowing exactly how much your monthly payment will be which allows you to budget accordingly. There are also Adjustable Rate Mortgages (ARM), a loan with an interest rate and monthly payments that can go up or down as often as once or twice a year because the adjustment is tied to a financial index, usually the U.S. Treasury Securities index. ARMs have allowed many first time homebuyers to get into a more expensive home because the initial interest rate is lower. A third type of mortgage many first time homebuyers often take advantage of is an FHA mortgage, a mortgage that’s insured by the FHA. Thanks to this insurance, many first time homebuyers have qualified for loans who might not have otherwise.
How Much Do I Offer on the Home.
First time homebuyers frequently ask how much they should offer when they find the home they want. Consider if the seller’s asking price is in line with similar homes in the area. You should also determine if the home is in good condition or if you’ll have to spend a lot of money to make it the way you want. Another factor that should be considered is how long the house has been on the market. Usually, the longer a home is on the market, the more motivated a seller is to accept a lower offer. Be sure you can afford a mortgage required to purchase the house. Finally, you and your spouse will want to discuss how badly you want the house. Your offer is more likely to be accepted the closer your offer is to the asking price.
If your offer is rejected, it’s not the end of the world. You are in the driver’s seat and have a choice. You can either walk away or negotiate. Negotiations can go back and forth several times before many deals are made. In some cases sellers are willing to cover some or all of the closing costs in exchange for a higher offer on the home. The important thing is to not lose sight of what you really want and can afford.
But if your offer is accepted, congratulations! In a few weeks your loan will be ready to close. At closing you’ll sit with your broker, the closing agent and sometimes the seller’s agent and seller. The closing agent will guide you through a stack of papers you and the seller will sign. The closing agent is there to answer your questions and will provide a basic explanation of each page. It’s a good idea to know what you’re signing especially since you’re committing to paying a lot of money for a lot of years. Your Homestead loan specialist will provide you with an estimate of closing costs and what you’ll need at closing.