Everything First-time Home Buyers Need to Know
Monday, February 5, 2018
Buying your first home is such an exciting time! It's a time to dream about your future and look back at how far you've come. Before you get started, there are some things you need to know.
You need a lot of documents to apply for a mortgage
When you apply for a mortgage loan, your lender needs a full picture of your financial health to help them determine how much money they can lend you and at what interest rate.
- Pay stubs
- Two years of W2s
- Tax returns
- Last three months of bank statements
- Documents showing other assets (stocks, investments, etc)
This process takes some time, so be prepared to wait a few weeks for your lender to process everything. Remember, this is not the time to start a new job, take out a car loan, or open a new credit card. Any changes to your financial life might mean your lender has to start the process over in order to account for the new information.
Using a credit union can save you money
Credit unions are non-profit institutions, which means they pass the money they make each year on to their members through benefits like lower interest rates and member dividends. Even a half of a percentage can make a big difference when it comes to how much money you pay each month and over time. For example, if you have a $100,000 loan with a 4.5 percent interest rate, you'll end up paying $506.69 every month. But if you have that same loan at a 4 percent interest rate you'll end up paying $477.42 every month. That's $29.27 saved every month or $351.24 saved every year.
Foreclosures are available
Most people don't have foreclosed homes on their radar when they start their home buying process, but you should let your Realtor know you're open to them. It's a good way to get a great home for a discounted price. The process for buying a foreclosed home isn't that much different from the typical process, so it's possible to look at both types of homes at once.
You need to budget for closing costs
A lot of first-time home buyers forget to factor in closing costs when they're thinking about their budget. This is a fee at the end of the process that covers things like legal fees, appraisals, and title searches. It's usually between two percent and five percent of your total homes costs. So, if you're buying a $100,000 home then your closing cost fees will be between $2,000 and $5,000. If you're worried about having the money set aside to cover those costs you can always schedule a financial counseling session with us. We can help you set a budget and savings goals to make sure your home buying process is relatively stress-free.