For Millennials, buying your First Home is an exciting adventure. Owning a home is the American dream. It’s also the largest investment most of us will ever make (aside from perhaps the cost of a college education), Knowing what you’ll need before starting the trek is just as important as knowing what isn’t required. Here are some tips.
Here’s what you’ll need:
♦ Get Mortgage Pre-Approval. A Mortgage Pre-Approval is a commitment by your lender that they will lend you a specific amount of money when you find your new home. By getting Pre-Approved for a mortgage before you start house hunting, not only can you shop with confidence, but you’ll be show sellers you are qualified and serious about buying their home.
♦ Enough income to pay monthly mortgage payments. Keep in mind that your monthly mortgage obligation will include not only the mortgage payment, it will also include an escrow payment for your home owners insurance (HOI), taxes, and your monthly mortgage insurance premium (commonly called PMI or MIP).
♦ The ability to maintain the property. You must keep a home in good repair or it will lose value and you’ll lose money. One of the “joys” of homeownership is keeping up with the chores around the house. You’ll need a lawnmower to maintain curb appeal and you can’t ignore peeling paint or unexpected repairs that eventually come along. If you’re handy you can DIY or you can hire someone to do it for you. Either way, it will cost money. And you ‘d better be prepared.
♦ A decent credit record. Your credit score is the major determining factor in your ability to get a mortgage at the best terms. Low scores are caused by late payments, bankruptcy or collection accounts
There is only one Website authorized by law to provide the Free Annual Credit Report you are entitled to under the Free Credit Reporting Act – annualcreditreport.com. Check it out! And if you see any problems, take action.
Here’s What You Won’t Need:
♦ A big down payment. Sure, it would be nice to be able to make a 20% down payment on your new home. With equity in your home, you can avoid paying PMI, you might get a better rate and you’ll lower your monthly payments.
But it is possible to buy a home with a small down payment. There are several loan programs available to qualified home buyers that allow for down payents as low as 3 to 3.5%; there’s even one that allows for up to 100% financing of eligible properties. Talk to a professional mortgage loan officer about the best option for your family.
♦ Experience. There is a lot of information on the internet about the whole home financing/home purchase adventure. It all tends to result in a giant jigsaw puzzle. Look to the experts for help putting those pieces together. A professional mortgage loan officer has the experience to guide you through the complicated mortgage application process. A trusted Realtor can help find the right house, assist with your negotiations and address other issues with the home purchase.