First-time Buyer ABC's
Costs: First you need to know your budget. This can be determined through a pre-approval from a bank or lender who is willing to write your mortgage. They will make a determination through your credit history, assets, employment history, and financial status. A pre-approval can shorten the time it takes to close and if there are multiple offers on the property it gives you an advantage over competing buyers who have not been pre-approved.
Making an Offer: Your agent can assist you in determining a reasonable purchase price. More than likely in today’s market, that offer will be less than the seller’s asking price. Your offer will be based the price of homes in the neighborhood, the condition of the home, and of course the current market conditions. This is what you are willing to pay for the home and once your signed offer is accepted by the seller you will be expected to follow through with the conditions of the sales agreement and the purchase of the home.
How Much to Put Down: Many financial experts recommend that in today’s troubled housing market you put at least 20 percent down on a house. However, there are other loans available such as an FHA with only 3.5 percent down. Discuss your options with your real estate agent.
Earnest Monies: This is a large purchase and you want to prevent having one party flee with all the funds. All deposits submitted with an offer (earnest money) are put into a third party escrow account. The funds are released to the appropriate party at closing or upon mutual agreement between seller(s) and buyer(s). Earnest money counts toward your down payment on a mortgage.
Closing Costs: These are costs that are paid at closing. Most closing costs are paid by the buyer and they average around 2-4 percent of the total purchase price of the home; however, you can negotiate payment and closing costs with the seller, particularly in a buyer’s market. These costs include an appraisal, title services, title insurance, transfer taxes, inspections, loan origination, private mortgage insurance, and homeowner’s insurance plus some additional charges.
Mortgage Insurance: Also known as private mortgage insurance (PMI), this insurance will protect your lender if you default on the loan and it can be required if you are making a small down payment. The cost is approximately one percent of the loan amount. The Homeowner’s Protection Act of 1998 dictates that mortgage lenders /services must automatically cancel PMI coverage on most loans, once the mortgage is paid down to 78 percent of the value if the loan is current.
Property Taxes: An unavoidable part of home ownership, property taxes are paid each year to your local county government. The price of these taxes is based on a percentage of the property value and varies from one part of the country to the other. You can expect that the more expensive the house, the more you will pay in property taxes.
A Mann & Sons real estate agent can guide you through a first time home purchase. They are available with their expertise and experience to answer your questions and guide you in the right direction making your first time home purchase a positive experience.