Home Buying Challenge: Not Understanding the Full Financial Impact of a New Home
Home Buying Challenge: Understanding the Mortgage
- The type of loan. There are a many different types of home loans that you can apply for. Seek the advice of your lender or mortgage broker to determine the type that best fits your situation.
- Your credit score. Your credit score plays a vital role in what type of mortgage you can obtain. For example, to qualify for an FHA (Federal Housing Administration) loan with its lower down payment requirement, you need a minimum credit score of 580.
- Prequalify for a loan. By prequalifying for a mortgage, you know how much home you can afford before your home search even begins. This will help you forego “reaching” for a place beyond your means. It will also help you approach your home buying from a more “logical” standpoint versus an “emotional” one.
- Mortgage terms. Don’t be shy about jumping in and learning all the “mortgage” jargón. Find out what the differences is between interest rate, APR, and discount points. By becoming knowledgeable in these areas you’ll be able to ask better questions and make more astute decisions.
Home Buying Challenge: The Down Payment
Take the time to focus on down payment options that will work best for you. For example, if your credit score is close to 580, but not quite there, you may want to take time to focus on raising it in order to qualify for the lower down-payment FHA loan.
Other Challenges and Considerations for First-Time Home Buyers:
- Don’t be afraid to ask for references from a potential real estate agent who will be representing you in your journey.
- Be sure to have an emergency fund that you regularly contribute to in order to help with any unexpected emergencies that may arise.
- When looking for a new home, you may have a checklist for the “perfect property.” It’s important to be flexible, as no home in your search will be “perfect.”
- Home inspections are vital to making sure you are getting what you are paying for. Be sure to talk to your real estate agent about having this done on the home of your choice.
- Make a list of the things “most important” to you when it comes to a new home and share this with your real estate agent to keep the search narrowed to your needs. For example, anything more than a few miles from downtown may be a “deal breaker” for you. Make sure your real estate agent knows this in advance to make sure you get relevant search results.