Now, more than ever, is a great time to be a first time home buyer. Housing costs are low, interest rates are at a record low, and you don’t own a home that you have to worry about selling and most likely lose a profit. However, just because it is an ideal time to make that next step, you need to ensure that buying a home is the right choice for you and your current situation.
Buying a home can be fun, exciting, liberating, and a great investment, but it comes with great responsibility, is labor intensive, and a large financial commitment. Once a purchase is made, you are responsible for anything that goes wrong in the house. A new roof, plumbing, new appliances, cutting the lawn, and snow removal now lay in your hands, not a landlord’s.
A few steps to take to figure out if you are ready to be a first time home buyer include:
- Check selling prices in the area you want to live. This will give you some good insight as to how much you will have to pay for the size house that you will need to accommodate you and your lifestyle. Zillow is a great site to see for how much homes in the area have recently sold.
- See how much you can afford. A great tool to use is a mortgage calculator. This allows you to enter the price of the home, the interest rate, the loan term, as well as the property taxes. This will give you a good idea as to how much your monthly housing expenses will be and if it is something you can or cannot afford.
- Get an idea as to how much you will pay in closing costs. This area gets confusing for most. You will see a lot of banks advertise: “No points, no closing costs.” If this is the case, you are paying a slightly higher rate, so that the loan officer gets paid more, so that he or she can use that extra money to pay your closing costs. If you don’t want to pay a chunk of money out of pocket, this may be a good option for you. Otherwise, you can choose to receive the lowest interest rate possible and pay the closing costs out of pocket. The fees that are included in closing costs are: Origination fees charged by the lender, title and settlement fees, taxes and prepaid items such as homeowner’s insurance or homeowner’s association fees.
- Look at your budget. Fannie Mae recommends that buyers spend no more than 28% of their income on housing costs.
- Pick up the phone. Make some calls to your local banks and see who is offering the lowest interest rate. Most will be in the same range, but a few points can make a big difference. Ask questions.
- Make sure your credit is in good standing. One of the largest factors of getting a good interest rate is having good credit. The better the credit score, the lower the rate. The worse your credit score is the higher rate you will receive. In some cases if your credit is so bad, you won’t qualify for a loan at all.
- Inquire about different loan programs. There are several programs out there now that help you to qualify for a home loan. A few include: Mass Housing, FHA, and Veteran’s loans. These are all great programs if you qualify and may more affordable than a conventional loan.
If you follow these basic guidelines then you should successfully be on your way to being a first time home buyer. Here at Northeast Financial Strategies, Inc., we have seamlessly guided thousands of home owners and business people through the buying and selling process. We work with a great local network of realtors, mortgage advisors, closing attorneys and home inspectors. Check out our Events Page to register for our next First Time Home Buyer Seminar happening tomorrow Wednesday 09/30/2015. If you have any questions regarding the purchase of your first home or would like us to guide you through, please feel free to contact us at: 800-560-4637.