Owning A Home—The American Dream
Both have always gone hand-in-hand. Like hot dogs and baseball, or ice cream and apple pie. There’s responsibility and patriotism to owning a home, taking stake and investing in a successful future.
But there are other ideas associated with the housing market. Finances. Consequences. Intimidating. There are fun parts to the process, like finding your perfect neighborhood and dream home, touring the houses and envisioning the interior design. Then there are the not-so fun parts: organizing and vetting decisions that come with a major financial decision.
Newlyweds search for the perfect home to raise a family. College graduates research the neighborhood that will jump-start their careers. With all the information out there, how many first-time homebuyers can say with 100 percent certainty they’re prepared for the process?
Whether you’re financially savvy or new to the market, it’s easy to forget and ignore these steps. There are ways to enjoy both sides of homebuying, and avoid the pitfalls in the future process. Ready to get started? We sure are—let’s begin!
Unfortunately, buying a home doesn’t start with the house tours. If you’re like most homebuying Americans, you’ll likely need to borrow payment in the form of a mortgage. To find the house of your dreams, you have to know what you can afford. To know what you can afford, you have to have a budget. And to start on that budget? You need to be pre-qualified for your loan amount.
Pre-qualification sounds permanent and menacing, but it’s really not. Often, homebuyers confuse pre-qualification with pre-approval. While similar sounding, these are actually separate stages to the loan process. Pre-approvals require verification, official documents, and contracts. Pre-qualification, on the other hand, consists of a hone call or meeting with a licensed professional.
Often there are no costs to pre-qualify, and no obligation. Homebuyers are given a guaranteed estimate, good for 90 days. Put simply, pre-qualifying only costs a phone call, and it gives a rough estimate to how much a homebuyer can borrow. With this estimate, along with online tools like our online mortgage calculator, homebuyers can further gauge their lender relationship. Discuss mortgage concepts and fees with credit scores, down payments, or mortgage points!
The most common mistake is often the first. Without an estimated loan amount, first-time homebuyers create a budget based on monthly earning or potential gift money. Shoppers are more likely to choose a home out of their budget if they aren’t working with loan information firsthand, their expectations ruined before they even started.
Take the first step! We have licensed professionals standing by, and they’re just an email or phone call away!
More Than A Home—More Than A Mortgage
Buying a home is a shrewd financial decision, recognized by many future homeowners. However, some may not realize that homebuying starts off as a significant investment. With fees and insurance, it’s slightly more expensive—at least, in the short-term.
To start, there’s your monthly mortgage payment. This cost fluctuates depending on the type of rate you sign up for. There are additional costs to consider. Maintenance, utilities, and taxes are costs that benefit you and your home directly. There are also Home Association Dues, Mortgage, and Property Insurance, which depend upon the size and price of the potential home and mortgage.
Some of these fees accumulate before closing a mortgage agreement—others, after. It’s good to know beforehand the fees you’re responsible for. Imagine going into the homebuying process with one figure, and leaving with a figure several hundreds, if not thousands of dollars more!
Putting a realistic perspective on your mortgage helps when you finally lock-in your loan agreement. Setting up extra money in a budget for down payments, associated fees, and a monthly mortgage payment comes with being informed and prepared about them.
Understanding Market Trends—Hiring A Professional
An estimated loan amount. Check. A potential neighborhood to move into. Double-check. You’re now ready to start the process, feeling more confident as you enter the market. Where do you start? You need to find a realtor, a lender, and other like-minded professionals. Which lender will give you the best deal and most personable customer service?
The Consumer Financial Protection Bureau reports that roughly half (49 percent) of shoppers consult with only one lender before deciding. But not all mortgage lenders are created equally. Lenders present different rates, fees, and customer service, often for the exact-same qualifications.
If you’re wondering where to start, the Federal Trade Commission has an excellent Mortgage Shopping Worksheet to review. Their worksheet traces an effective method for vetting mortgage lenders. In a nutshell, you want to ask at least three different lenders the following:
- Their current mortgage rates. Ask about the details—are they fixed or adjusted? What did the rates look like a week ago? What will my payments look like in ten months, or ten years?
- Their mortgage point programs. Ask them to explain to you the mortgage point process. Even if you know how mortgage points work, having your lender describe them is a good measuring stick to determine their willingness to work for you.
- The fees and down-payment requirements. It’s crucial to get an estimate of the extra payments being put towards your loan.
Also consider asking for customer references from your lender. A history of your lender working with customers successfully is invaluable.
We’d be honored to offer you a free consultation. Get to know us! We’ll do our best to show you the best deals on the market!
Financial Faux Pas—Resale Value, Savings Spending
Owning a home can feel like a romantic fairy tale. For some, emotion can take the seat in many financial decisions. You might find the house of your dreams, and it’s even in budget! At that point in time, it could feel like the home you’ll spend the rest of your life in. It very well could, just make sure you know the potential risks in your investment.
Life often changes. You might get a new job, or your family might grow a bit bigger. Years down the road, something changes, and you might have to sell your house. If you ever consider moving, a home’s resale value will help you keep, or even increase your initial investment.
There are several strategies to determine the resale value of your home. Research the relative price around the neighborhood, comparing key features of your house to similar properties.
Your real estate agent can help you gauge the potential trends. Other professionals, such as the National Association of Home Builders, can also assist you. Doing research on the National Housing Price Index (NPI) can help you get a ballpark estimate, as well as online real estate databases like Zillow.
The most important step is to keep your credit strong. Lenders pull credit scores within the last 30 days of closing. Deals are killed as applicants dip into their savings or make other big-ticket purchases. Homeowning can be invaluable, but it can also be confusing. The first steps are to stay informed, and to find professionals you can trust to guide you. At First Option, we’re thankful for the lifelong relationships we’re a part of.
If you have any questions about the mortgage process, or would like to get started, please get in touch with us. Or, you can always contact us on Facebook or Twitter for an instant response! Feel free to say hi!
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