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Buying Your First Home? Here’s What You Need to Know.

Family sits on the front steps of their brand new home.

From landing your first job to the day you get to retire, there are a lot of important milestones in your life. One of the most exciting life events, however, is unlocking the door to your very first home. But, while house-hunting for the first time is a fun and exhilarating experience, there are many things first-time homebuyers should know to avoid financial frustration and unnecessary roadblocks in the future.

Discover what you should know as a first-time homebuyer with this helpful guide from Landmark National Bank.

Make Sure You Can Afford a Home

Before you start scrolling through Zillow or setting up showings at your dream properties, make sure you can afford the unexpected costs associated with a home. While the idea of owning your own property is often more appealing than renting, it comes with a variety of extra expenses that rentership typically covers, such as utilities and home repairs. So, to ensure you have enough to cover homeownership, it is important to figure out dollar amounts for your:

  • Earnings after taxes
  • Total debt (i.e., car loan, student loans, credit cards, etc.)
  • Average monthly expenses (i.e., groceries, gas, cell phone bill, etc.)
  • The amount you would like to save each month

Once all these expenses are calculated, you are in a better position to tailor your budget to include a mortgage payment. While your current budget may be able to cover the cost of renting, it’s crucial to calculate how your current financial situation will cover owning a home. Typically, it is best to keep the combined cost of your mortgage, taxes, and insurance between 25 and 30 percent of your income.

Reduce Your Debt

Before buying your first home, go the extra mile to prepare financially by calculating how you can lower or eliminate your debt. By having little to no debt, you can show a lender that you are in a stable place to purchase a home. In addition to lowering your debt, it is also wise to create an emergency fund in case something happens during your home purchasing process.

Be Ready with a Down Payment

By having a down payment ready to go before you start house hunting, you can lower your monthly principal and reduce the amount you owe on the home. Typically, home purchasers are required to come to the table with 20% of the property’s value, but there are many first-time homebuyer programs that reduce the down payment cost. In fact, many first-time buyers can qualify with as little as 3% down. In addition, veterans applying for a Veterans Affairs (VA) loan or first-time buyers applying for a Rural Development (RD) loan can qualify for no down payment!

When choosing a way to cover your down payment, keep in mind that your home is an important investment. While properly saving money for the down payment may require more patience, it can save you financial frustration in the future.

Find the Best Mortgage Loan Type and Payment Options

Oftentimes, you will need a loan to purchase a home. In fact, getting pre-qualified for a mortgage loan is a key part of deciding if you are ready to buy a home. Your pre-qualification can help ballpark your house-shopping budget.

Mortgage Loan Types

Before choosing a mortgage, it is crucial to understand the differences between a fixed-rate mortgage and an adjustable-rate mortgage. Discover the following pros and cons of each mortgage type:

  • Fixed-rate Mortgage: Charges set interest rate that does not change.
    • Pro: Borrower is protected from spikes in mortgage payments
    • Pro: Easy to understand
    • Pro: Does not vary from lender to lender
    • Con: Difficult to qualify for when interest rates are high
  • Adjustable-rate mortgage: Charges interest rate that constantly changes.
    • Pro: Cheaper than a fixed-rate mortgage
    • Pro: Often easier to apply for a larger loan
    • Con: More complicated than fixed-rate
    • Con: Monthly payments can change frequently

Choosing a Realtor

After you have been pre-qualified for a mortgage and have a general home-hunting budget, it is important to choose a realtor who will consider your needs and wants while finding a home that is still affordable.

Additionally, a realtor can help you negotiate the contract terms of your new home and guide you through the complicated paperwork. A Realtor can also help you navigate through the final stages of closing the deal on your home.

Get Your New Home Inspected

When you have found the home that is right for you, schedule a thorough home inspection. While you do have to pay for a home inspection, it is worth the cost. The inspector may find hidden issues that an untrained eye may miss, such as termites, mold, and foundation issues.

In addition to saving you thousands of dollars in home repairs, a home inspection can help you renegotiate the asking price for the home, or help you leave a deal without losing money.

Avoid Major Life Changes During Escrow

After your offer for your new home is accepted, there is a stage called “escrow.” During this period before closing on your house, your lender will examine your documents, finances, and other information to see that are all are in order. To help your escrow period run smoothly, remember the following:

  • Do not buy or lease a car
  • Do not buy furniture on store credit
  • Do not change jobs
  • Do not change your marital status

Prepare For Your Move After Closing

When it is time to close on your home, you will sign your final papers and complete the sale. Before you move into your new home, be sure to change your address with your bank, utility providers, and other important parties. Taking care of your address change quickly can help you avoid missing important mail or bills.

Purchase Your First Home with Help from Landmark

If you’re not sure where to start when it comes to choosing a mortgage, Landmark National Bank offers a wide variety of mortgage services, including:

  • First-Time Homebuyer Programs
  • Conventional Fixed-Rate Mortgages
  • Adjustable Rate Mortgages (ARM)
  • VA, FHA, USDA Programs
  • Jumbo Loans

When you are ready to buy your first home, we are here for you. Our team of home loan specialists is available and happy to help you find the mortgage solution that is right for you. Take the first step toward your first home and find a Landmark National Bank branch near you today. Ready now? Reach out to a mortgage lender near your market area to begin the pre-qualification process.

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