Homeowner's Guide: First Time Buyers
Purchasing a home is a big decision, especially if you are a first time buyer. The process is intimidating and lengthy. However, it can also be exciting if you feel comfortable with your decisions along the way. Preparing yourself for all of the steps involved in purchasing a home can help ease any anxiety you may have. To learn more about buying your first home, consult the tips below.
How Much Can You Afford?
When determining how much you can afford to pay for your home, you must consider your down payment amount, monthly expenses, credit rating, and income. Using this information, you can determine a comfortable price range. Until you know how much you can pay toward a mortgage each month, you can't effectively search for a home. You must also calculate your debt-to-income ratio to ensure that you are within acceptable limits.
Consult the following links to find some helpful tools for determining affordability.
- Annual Credit Report: Obtain a copy of your credit report.
- The Debt Ratio: An article that explains debt-to-income ratios.
- Mortgage Calculator: A site with multiple financial calculators to determine mortgage payments and affordability.
- Home Buying Tips: An article to help you determine what you can afford to spend on a home.
When shopping for a loan, you must consider the interest rate and loan term. The higher the interest rate, the more money you will pay each month. Interest rates may be fixed or adjustable. Adjustable interest rates can change, while fixed interest rates remain the same. Most mortgages are either 15 years or 30 years long. A 30-year mortgage involves a lower monthly payment than a 15-year mortgage for the same amount, but the total amount paid in interest will be greater.
- Looking for the Best Mortgage: An article about shopping for a good loan.
- Shopping for a Loan: A page with relevant definitions and tips for loan shopping.
- What to Know When Shopping for a Mortgage: An article that explains the steps involved in obtaining a loan.
- Mortgage Shopping Tips: A page that explains mortgage shopping terminology and offers advice.
After you know your price range, you can begin shopping for a home. To find the right home, you must consider location, appraised value, and amenities. Pay attention to the number of bedrooms and bathrooms each home has. In addition, make sure that you view several homes before making a decision. Finally, don't forget to calculate relevant distances, such as the distance to work or the nearest store.
- Find Your Home: Questions you should ask yourself before choosing a home.
- Choose a Home: An article that explains the process of choosing the right home.
Making an Offer
When you make an offer on a home, you won't typically offer the seller's asking price. However, it's important to make sure that your offer isn't so low that the seller will be insulted. In many cases, the seller will issue a counter-offer that falls somewhere between your initial offer and the selling price, so keep this in mind when you make your first offer. Some sellers may be willing to include appliances if you will agree to pay a slightly higher price for the home.
- How to Make an Offer: A page detailing the process of making an offer to purchase.
- Tips for Homebuyers Making Lowball Offers: (PDF) An article about offering less than the selling price.
A home inspection is an evaluation of a home's systems and physical structure. Most home inspections involve an inspection of the foundation, doors, windows, ceilings, floors, walls, electrical systems, plumbing, air conditioning, and heating. Home inspection fees are often part of the closing costs when you buy a home. Some lenders won't approve your loan until the home passes inspection.
- Home Inspection Checklist: A checklist of items that must be examined during an inspection.
- Home Inspections: A list of frequently asked questions about home inspection.
- Get A Home Inspection: An article that explains why you need a home inspection.
- Questions and Answers on Home Inspections: A page that answers common questions about home inspections.
Most lenders require you to purchase home insurance, which compensates you if your home sustains certain types of damage. The cost of your insurance will depend on the age of your home, its price, and its location. Before choosing an insurance policy, obtain several different quotes and compare them. In most cases, you will make your insurance payments directly to your lender using an escrow account, so make sure that you provide the lender with your insurance information.
- Homeowners Insurance: An in-depth explanation of home insurance.
- Ten Things You Should Know: A list of important facts about purchasing home insurance.
- Mortgage Escrow (PDF): An article that explains escrow accounts.
Signing the Papers
The last step in buying a home involves signing the papers. The process of signing all of the final mortgage documents is known as "closing." At closing, you will finalize all of the details on your purchase. Both you and the seller must sign documents, and the closing costs must be paid at this time. Depending on your arrangements, you may take possession of the house immediately after closing or on a predetermined date in the future.