CCNB Offers Tips for First-time Homebuyers
Moving into your own home can be exciting and a bit overwhelming for first-time homebuyers. Let CCNB’s team of experienced mortgage lenders help guide you through this process and get you started on the path of homeownership.
Important Questions To Consider:
1. How much money do you have saved up? Start with an evaluation of your financial health. Figure out how much money you have for a down payment. Security deposits on rentals are usually about one month of rent and more if you have a pet. But be sure to keep enough in savings for an emergency fund. It’s a good idea to have three to six months of living expenses to cover unexpected costs.
2. How much debt do you have? Consider all of your current and expected financial obligations like your car payment and insurance, credit card debt and student loans. Make sure you will be able to make all the payments in addition to the cost of your new home. Aim to keep total rent or mortgage payments plus utilities to less than 25 to 30 percent of your gross monthly income. Recent regulatory changes limit the debt to income (DTI) ratio on most loans to 43 percent.
3. What is your credit score? A high credit score indicates a strong creditworthiness. Both renters and homebuyers can expect to have their credit history examined. A low credit score can keep you from qualifying for the rental you want or a low interest rate on your mortgage loan. If your credit score is low, you may want to delay moving into a new home and take steps to raise your score. For tips on improving your credit score, visit aba.com/consumers.
4. Have you factored in all the costs? Create a hypothetical budget for your new home. Find the average cost of utilities in your area, factor in gas, electricity, water, and cable. Find out if you will have to pay for parking or trash pickup. Consider the cost of yard maintenance and other basic maintenance costs like replacing the air filter every three months. If you are planning to buy a home, factor in real estate taxes, mortgage insurance and possibly a homeowner association fee.
5. How long will you stay? Generally, the longer you plan to live someplace, the more it makes sense to buy. Over time, you can build equity in your home. On the other hand, renters have greater flexibility to move and fewer maintenance costs. Carefully consider your current life and work situation and think about how long you want to stay in your new home.
6. What are homes selling for where you’re looking to buy? Check the selling prices of comparable homes in your area. Do a quick search of actual multiple listing service (MLS). There are a number of websites like the National Association of Realtors, and Zillow, you can reference to make this process easier.
7. Use CCNB’s mortgage calculator to help you estimate what your monthly mortgage payments might be.
8. Consider meeting with a financial planner/tax advisor so you’ll know what your total monthly housing cost would be. Remember to factor in taxes, homeowner insurance, and budget for any other fees and expenses.
APR: Short for annual percentage rate, APR is how much your loan will cost over a year. This figure is almost always higher than the interest rate because it takes into account the interest charged as well as fees or additional costs associated with the loan. Since all lenders use the same formula, it can be a more effective way of comparing mortgages rather than just the interest rate.
Closing costs/settlement fees: The costs, in addition to the price of the property, that buyers and sellers are charged to complete a real estate transaction. Costs include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed recording fees,, and credit report charges.
Escrow: An account held by a neutral third party (called an escrow agent) who works for both the lender and the borrower. Escrow accounts are usually required by lenders to cover property taxes and mortgage insurance. After an initial deposit, borrowers pay into the escrow monthly – usually as part of the mortgage payment.
Loan Estimate (LE): An accurate estimate of fees associated with a loan provided to the customer by a mortgage lender or broker. The estimate must be provided within three business days of applying for a loan.
Mortgage broker: An individual or company that connects borrowers and lenders for the purpose of facilitating a mortgage loan. Unlike a mortgage lender, a broker does not make the loan or service the mortgage. A mortgage broker may represent various lenders or may offer loans from one single source.
Points: Borrowers can pay a lender points to reduce the interest rate on loan, resulting in a lower monthly payment. The cost of one point is equal to 1 percent of the loan amount.
Need MORE? Click here for a glossary of mortgage terms.
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Call us toll-free at 866-418-9219 or in Myrtle Beach at 843-839-2265 for more information. NMLS #405498