Essential Tips for First Time Home Buyers

Tired of renting? Ready to own your own home? Here are some steps to make sure you are prepared to take the leap. Before you start looking for your dream home, sit down and start with a financial blueprint. Every home has a plan that the builder uses to construct a structurally sound building. The blueprints are the guide to ensure all the elements, from the foundation and framing to the electrical and plumbing works seamlessly together. This financial blueprint for first-time homebuyers will be instrumental, to ensure your first time home buying experience is financially sound.

Build a nest egg

Plan to have a significant amount of money for the down payment. The more you have as down payment, the less your monthly mortgage payment will be. As you research your mortgage options, you want to be aware that some mortgages will require a PMI (Private Mortgage Insurance) payment to be included with your monthly mortgage if your down payment or credit rating is not as secure as the lender would like. The PMI (Private Mortgage Insurance) is the lender’s insurance against the risk they take to give a loan to someone who does not have enough for the down payment.  It can be 0.5% – 1% of the balance of the loan per year. It is an essential factor as that will affect your monthly balance after you secure the home.

Credit Check

You should be reviewing your credit rating annually.  If you are planning to shop for a home within the next year to 6 months, you should look at your credit score and make sure it is the best it can be.  Don’t cancel any credit cards before a major purchase. Make sure all bills are paid promptly, and you do not have a large amount of money owed on your credit cards. A stronger credit rating will secure a better mortgage.

Calculate what you can afford

You might be tempted to start looking at homes now.  But we need to build more layers to our blueprint. Savings in hand and a sound credit report is a great start. Now you need to calculate what you really can afford.  The lenders are ready to give you money, but you need to look at a few scenarios before shopping for a pre-approved loan.

You need to look at your monthly income versus monthly expenses.  How much can you put toward a monthly mortgage? Will you be using one income or counting on two salaries to make ends meet?  Review what-if scenarios, too. You might be relying on a two income monthly salary but what if someone gets laid off? You may be fine with a house that has a big yard but what about the cost of snow removal in the winter or summer pool maintenance. Homeownership affordability includes property taxes, HOA fees, property maintenance, and upkeep.

Pre-approval loan

Shop for a loan before heading out to the open houses. You have established three key pillars to your financial blueprint.  The fourth and sturdiest pillar will be the pre-approved mortgage loan. With the pre-approval, you will be prepared to make an offer in the tightest of housing markets. This may mean the difference of getting your dream home or having to continue your search because your loan information took a few extra days.

Closing Costs

Congratulations you are steps away from being a new homeowner.  Before you get the keys, you need to be prepared for additional fees. The closing costs can shock some first time home buyers. You have done all you could to get the down payment and settle up the loan, but when you sit down for the signing of all the final agreements, there is a list of additional fees. These fees can be for a property survey, attorneys fees, title transfer fees, home inspection, and property taxes just to name a few.

Transitional Money

Keys in hand! You are a new homeowner! Just a few more financial pieces to be aware of. You will need to set aside money for moving costs. Whether you are doing it yourself or having a company move you. You need a moving budget. Also plan out extraneous costs for things like utility transfers, cable and internet, or additional transportation costs during the move itself. You need to have a savings plan for some of those household projects and upgrades you thought about doing too.

Our mortgage department at Members 1st NJ Federal Credit Union is ready to be the key player in finding your dream home.