First-time home buyers’ guide: Getting Started
Here are some key terms and concepts that are important to know about when buying a home:
Mortgage prequalification. Complete a mortgage prequalification application before you shop. Lenders will provide a prequalification letter based on a review of your credit report and other information you provide. It is a worthwhile process, as you are a more attractive buyer with a prequalification in hand.
Know what current prices are like in your area. It’s important to research the current purchasing climate. You can do multiple listing service (MLS) searches in your area on a number of web sites, including the National Association of Realtors’ site at www.realtors.org.
Know what you can afford. The general rule is that you should spend no more than 28% of your income on housing costs. Based on factors like debt load, your monthly income and your employment circumstances, lenders calculate how much they’ll loan you. To effect the initial purchase, you’ll need a down payment, a mortgage and funds to cover any closing costs. After you close on the property, you’ll be responsible for a monthly mortgage payment, insurance and taxes, plus ongoing maintenance and improvement costs.
Be aware of what you can actually borrow. Based on factors like debt load, your monthly income and your employment circumstances, lenders calculate how much they’ll loan you.
Research your insurance and tax costs. Talk to your local assessment office to get an idea of what you'll pay in taxes. Taxes do change from year to year because of factors like exemptions and local tax law, so take into account that there may be differences in what you can expect to pay as a new homeowner.
You will need the following information, at a minimum, to secure a mortgage:
Employment and income history: Lenders will need to know where you work and how long you’ve worked there. You’ll need to provide documentation of your annual income and its stability.
Liabilities: These include your debts and the payments you make on those debts, including the proposed payment for your new mortgage and taxes and insurance for your new home.
Your lender will always view a copy of your credit report. You should know what they will find. Make sure you are familiar with your credit score and the information contained in your credit report.
Assets: Do you have the funds necessary for down payment and closing costs?
Closing costs, or the upfront costs of settling on your home, include lender’s origination fees, title and settlement fees, taxes and prepaid items like homeowners insurance. Again, by researching online or speaking with your realtor, you can get an idea of what average closing costs may be in your area.
Owning your own home is a major part of the American dream. The mortgage lending experts at Northwest can help make this a reality. Visit your local Northwest office to speak to a professional about home ownership and a mortgage to fit your needs.
For more information, contact the Mortgage Helpline at 1-888-884-4626.