We’re buying our first home
Nothing quite compares with the pride that comes with home ownership. For most of us, it’s the biggest single purchase we will make and that can seem rather daunting. But if you have an understanding of the options, the costs, and the obligations, you can confidently make the right move.
Borrow an amount that’s right for you – Few people are in a position to purchase their first home with cash; this means the majority of first-time homebuyers will have to borrow. Generally, an individual or family should spend no more than two to two-and-a-half times their annual income for a home.
Account for all the costs – In the excitement of looking for a first home, it’s easy to overlook all the expenses involved. For example, there are usually closing costs that can add up to 2 to 4 percent of the price of the home you are buying. Then add ongoing costs that come with home ownership, like property taxes and homeowner’s insurance. And don’t forget about maintenance and repair. A good rule of thumb is to save 1 to 3 percent of the value of your home each year for such purposes.
Go ahead and get prequalified – By getting prequalified, the bank is letting you know how much money you qualify for so you can search for the perfect house in your price range. Before you place an offer, you will need to get approved. This means the bank has verified your data and has agreed in writing to provide you with a home loan for an agreed upon amount.
Determine the down payment – A down payment can be anywhere from 0 to 20 percent of the total value of the home, depending on the type and conditions of the loan. Most first-time home buyers spend an average of two and a half year’s savings for their down payment.
Understand the different mortgage options –
- A fixed-rate mortgage comes with a rate that stays the same for the life of the loan.
- An adjustable-rate mortgage (ARM) offers a lower rate for a set period at the beginning of the mortgage, and then adjusts after that period (either up or down depending on market conditions).
- If you qualify, you may be able to get more favorable terms on a loan insured by the Federal Housing Administration – these are called FHA loans.
- And veterans can apply for a VA mortgage through the Department of Veterans Affairs (VA). Also, these mortgages usually require a smaller down payment than “conventional” home loans.
Ensure you’re covered – Buying a home is a large investment, so you’ll want to ensure you have adequate coverage to help pay for damages to your home, or even to rebuild it, in the event of a total loss. Plus, try to have adequate liability coverage in the event someone is injured on your property.
If you'd like to discuss your options in person, find a lender near you.
The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its affiliates and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.