You saved up. You cleaned up your credit report. You talked to your Mortgage Loan Officer about how much you can afford, and now, you’re ready to purchase your first home.
This is exciting! Have you thought about where you want to buy and what features are your must-haves? Do you need at least three bedrooms or can you live with two bedrooms? Do you need a garage and possibly a large lot of land?
Going through this process for the first time can be exciting and scary at the same time. Purchasing a home will most likely be the biggest purchase in your life. You want to find a home you’ll be happy in, and you don’t want to over-pay, and you especially do not want to be house-poor (where your house payment eats up so much of your paycheck that you barely have enough money to live on).
To make this a great experience, make sure you understand these steps below.
First, look at your personal finances and talk through them with your Mortgage Loan Officer. Buying a house comes with more payments than just your mortgage loan payment. The mortgage loan payment is made up of both principal and interest. In most cases, if you’re down payment isn’t at least 20%, then you will also have PMI or MIP included in your mortgage payment as well. These acronyms stand for private mortgage insurance and mortgage insurance premium. They represent the same thing, but PMI is used on conventional mortgages where MIP is used on FHA mortgages. These are charged when borrowers can’t come up with the full 20% down payment. In addition to your monthly payment you will also have property taxes which go to the county of your property as well as homeowners’ insurance. In some cases, the lender may require you to escrow, which just means that your property taxes and your homeowners’ insurance payments will be combined into your monthly mortgage payment.
In additional to these items, you will have utility payments (water, gas, electric) and likely some type of trash collection fee each month. If you want a big yard, then you will also need to maintain it by either purchasing a lawn mower or paying someone to mow it. As the house ages, things need to be repaired. For example, carpet may need to be replaced. Furnishing a house can be expensive too. You most likely have some furniture from your apartment, but furnishing a house generally takes a bit more. Furnishing a new house can also be very fun. It’s exciting to put your own design into your new house.
With all of these payments coming your way, determine how much you can afford with the help of your Mortgage Loan Officer. This number will come in handy when you start looking at properties.
Second, before you start looking at properties, figure out the general vicinity where you want to live and what features are needed for you to live in this property? This is common sense, but do you want to be close to work or close to your children’s school? Do you and your spouse work in different cities, and you’d like to find a spot in the middle? Do you want to live in town or in the country? Are you a night owl that likes to be near all of the action or would you prefer to be in a quieter area? These are all questions to think about.
Is having an updated kitchen more important than having two bathrooms? Or is having three bedrooms more important than having a two-bedroom with a garage? Depending or your budget, these are choices you may need to make. It’s good to know what you can live with and what features you need in order to be happy in your new property.
Third, find a good Real Estate Agent and start looking at properties. With technology today, you have the ability to find properties yourself. I would always recommend using a real estate agent once you find some properties you are interested in. Looking at properties can be fun and exhausting at the same time. Make sure to look at two properties as a minimum. You may find the perfect house on your first try, but at least look at one more just to be sure that first one is the right one. At this point it’s very easy to get emotionally attached to a property. This is where it’s good to have your price point ceiling and ensure you do not offer over it. Even though you have your heart set on this property, if there is a bidding war or if the Seller wants too much for the property, know your own limits and don’t splurge.
The last step is to write up the offer with your Real Estate Agent and submit it to the Seller. Keep your Mortgage Loan Officer in the loop as you write offers.
Happy House Hunting!
If you have any questions about the above article or are interested in applying for a mortgage loan, please feel free to reach out to me at carnold@westernohiomortgage.com.