So you’ve finally gotten to the point where you’re ready to buy your first home. You’ve found the house you want to buy and you’re getting ready to tackle the financial portion of the home-buying process. You know you’re going to need a mortgage, but do you know everything you’re going to need it for?
There is a lot more to finalizing a mortgage than just signing an agreement, and each of the processes and services comes with a price tag. You’ll need to plan on paying for the closing costs associated with buying a home. These costs include things like property-related fees, loan-related fees, property taxes, annual fees, insurance, and title fees. Altogether, you can expect to pay 2-5% of the value of your loan in closing costs.
How much do you intend to pay as a down payment? Traditional wisdom indicates that 20% of the value of a home is a good, solid down payment. Many first-time home buyers today have a tough time scraping that much money together though, and it isn’t necessarily required these days. That said, if you make a downpayment of less than 20%, you’ll have to carry private mortgage insurance (PMI). You can get rid of it later by refinancing your loan once you have at least 20% equity in your home. It’s an option well worth considering. A refinance can save you thousands of dollars over the life of the loan.
It’s important to have a home inspected before you close the deal. That gives you an idea of what issues are present and in need of attention. If you bring them to the attention of the seller, they may be willing to handle getting the repairs done so you don’t have to do them yourself as soon as you move in. Don’t think that means you’re off the hook to pay for it though. You may find that the cost of repairs gets included in the price of the home once all is said and done, depending on the details of your agreement.
One of the tough parts about being a first-time home buyer is that you don’t have any prior experience to pull from. This can make it easy to forget about the different things involved in your mortgage costs. Closing costs, private mortgage insurance, and the cost of repairs can all be intertwined with your mortgage. Make sure you have a clear understanding of everything that goes into your mortgage before closing the deal so you can avoid any unpleasant surprises down the road.
Getting into your first home can be a real group effort. Contact us so we can help you along your home buying journey.