So, you’re buying your first home…
First things first, BREATHE! Buying a home shouldn’t be scary. The NextDoor Lending team is here to make sure you know all the ins and outs of the home buying process before you ever cross that threshold. Stick with us, follow these guidelines, and you’ll be unpacking boxes in no time!
What you need to know when you buy your first home.
How much can you afford?
This is the most important question you can ask yourself. Be realistic. You want to make sure you are setting aside enough towards retirement, bills, and other life goals first. Once you’ve got that number, you want to estimate how much you can spend each month on a mortgage payment. NextDoor Lending has a Monthly Mortgage Calculator that can be found here.
Down payments & closing costs
The borrower’s contribution for a First Time Homebuyer loan is a minimum of 3% of the home’s appraised value or purchase price, whichever is less. However, the larger your initial down payment, the less your monthly mortgage payment will be. If you can afford to pay 20% initially, you will avoid paying Private Mortgage Insurance (PMI).
The hidden costs of home ownership
Some things you may not be thinking of right now:
- Homeowner’s Insurance
- Property Taxes
- Maintenance & Repairs
Selecting the right mortgage for you
Selecting the right type of mortgage may seem like a difficult step, but it’s really all in the numbers. Once you’ve figured out how much you can afford monthly, you must then find the loan that matches this number as closely as possible. For some, a traditional fixed-rate mortgage may be the answer. For others, an adjustable rate mortgage (ARM) may make more sense. It’s all a matter of what works best for you, your budget, and your future goals.
Hiring a real estate agent
Not every real estate agent is the same. Ask your family, friends, and co-workers who they recommend. Call around. You don’t have to settle for the first one who picks up the phone. This process is about you and you want to make sure that you are comfortable every step of the way. A great agent should know how much properties are worth, be able to facilitate the sales process, and deliver your offer to the seller’s agent. Typically, both the selling and the buying real estate agent are compensated by the seller. Their commission is based on the sales price of the home.
Once your offer is accepted, you will want to have the home inspected. Your real estate agent will usually share a list of contacts they use for inspections. The bank will also order an appraisal to make sure what you are paying is a fair price for the home. After all this is complete, your loan officer will prepare an estimated list of closing costs, along with your down payment.
The NextDoor Lending team at Southbridge Savings Bank is here to help you navigate your first home buying experience. Download this informational sheet (.pdf) to get you started in the right direction. For more information from a variety of other sources, please check out our Links and Resources page.