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TIPS ON BUYING YOUR FIRST HOME
By Dan Derrington Guest Columnist
One of the first thing couples do as they begin their life together is decide on a home . While this home isn ’ t necessarily the “ forever home ,” it ’ s still significant as being the “ first home .” Finding the right house for the right price at the right time is a big deal . The process of buying a house can be intimidating if you don ’ t have things in order . Here are a few thoughts to consider that should help make your home-buying experience less intimidating and pain free .
How ’ s your credit ?
Having credit is as important as having good credit . While there are a number of credit resources in the market , they don ’ t exactly line up with what banks use . It ’ s important that you monitor your credit for accuracy , pay payments on time and not over-extend your ability to repay your debt . Having at least 12 months of credit history with three to four accounts is helpful . These accounts can be personal loans , credit cards or student loans .
Your credit score plays a big
Derrington part in the type of mortgage and the interest rate in which you will qualify . Your credit score is similar to your GPA ( grade point average ). It starts out high and strong . With missed payments , too many open balances or overextending your credit , your credit score will fall . The process of building your score back up takes a great deal of time and effort . Paying payments on time , managing your outstanding balances on credit cards and maintaining accounts properly are all big factors in keeping your credit score where you want it to be .
Who is your mortgage lender and realtor ?
You aren ’ t supposed to know everything about buying a home . But , real estate agents and bankers should . It ’ s important that you find a realtor and mortgage lender that will have a vested interest in you and your goals . This is often a step that isn ’ t given the attention it needs .
Finding a mortgage lender should always start with your local bank . While online mortgage companies may paint a nice picture of the mortgage process , nothing beats a partnership with your local bank . A local mortgage lender has a vested interest in the community and you . Take some time to visit with several mortgage lenders to find the one that best fits you . Once you ’ ve decided on your lender , you will have the opportunity to share your goals and objectives as you search for your new home and subsequent mortgage product . As the mortgage lender begins to understand your goals , your lender should have options to present to you . With a wide array of both in-house and secondary market mortgage products , a good lender will know how to align the right product with you .
Real estate agents are the second crucial part of the home-buying process . They may take 100 calls or texts from you during the entire home-buying process . But , that ’ s what they do to make sure you have a good experience . Your realtor will be able to point out pertinent information about the homes you visit that you may not recognize . The agent will handle the details , both big and small , from inspections to scheduling your closing . Once you ’ ve closed and the home is yours , you ’ ll recognize the significance of this step for sure !
How much can you afford ? Having the home of your dreams isn ’ t always the right thing for a newly married couple . Financial adjustments are a big part of a marriage and being “ house poor ” isn ’ t easy . With a traditional mortgage , you have certain fees that come with getting a 15- or 30-year fixed rate . The principal and interest payment is based on your loan amount , term and rate . You may choose to escrow , which includes your property taxes and insurance in the payment , which will increase your monthly payment . And , if you don ’ t have 20 % down , you will add mortgage insurance to the payment . So , what you think might be affordable on a monthly basis may not fall in your budget once all the facts are on paper . And , there are always personal changes to the home as well as maintenance and upkeep that should be factored into the affordability of the home . And finally , don ’ t just look at the monthly payment . Consider the overall cost of the home over the time you will pay on it and let that be some additional guidance to determining how much you need to spend .
How much should I put down ? Down payments can play a major factor in the home-buying process . The days of zero down payments seem to be going away so having a down payment of some form is becoming the new normal . And , the larger the down payment , the wider the mortgage options will be . Larger down payments will lower your monthly payment and , subsequently , the total amount paid on the mortgage over the life of the mortgage . When considering a secondary market mortgage , having a down payment of 20 % or more will eliminate mortgage insurance and could allow for a better interest rate . And , some mortgages will even allow for gift funds from family .
Can I pay my mortgage off early ?
In today ’ s mortgage environment , prepayment penalties are rare . But , don ’ t let a penalty or other facts in the fine print catch you off guard . Whether it ’ s due to selling the home or simply paying extra payments to pay-off the mortgage , no one should be penalized for getting out of debt . Some homeowners double up on their monthly payment or pay large sums during the course of a year in effort to pay off their mortgage off early . Be sure that this won ’ t cause you any grief for being a good steward of your money .
“ No ” doesn ’ t mean “ never ” Home ownership isn ’ t the best option for some people ... sometimes . Credit repair , saving a little more down payment or recognizing that practicality is part of “ adulting ” can all play a part in deciding to buy a home . While rates are at an all-time low , buying a home when the time is just not right can lead to regret that cannot be overcome . So , if your lender ’ s response is “ not right now ”, consider this as the beginning of a better option later . Set your sights on the future and make a plan to get there . As the saying goes , “ timing is everything ”!
• Dan Derrington is senior vice president and mortgage lender for Great Southern Bank .
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