Buying your first house is a rewarding and exciting experience, but financing it can be daunting if you don’t know what to expect.
In both cases, do your research and shop carefully to ensure you find what you want and need.
Deciding how much to spend on your home and which type of mortgage will work best for you – as well as understanding the settlement process – can be confusing. However, there are many sources that can prepared you well before you step foot into a sales office, model home or open house.
Get familiar with the terminology. NAHB’s Home Buyer’s Dictionary can help you understand the terms and phrases commonly used in home financing.
Figure out what you can afford to pay on a monthly basis. Remember that in addition to the monthly principal and interest you will also pay into escrows for property taxes, hazard insurance and possibly a homeowners’ or condominium association assessment.
You have more knowledge about your living expenses than a lender. Hold firm with that number and don’t be tempted to agree to an amount higher than what you’re comfortable spending. Online mortgage calculators are a great way to figure out what your monthly payments would be based on interest rates and down payment amounts.
Pay down your debts. Credit card debt will limit what you qualify for from a lender. Lenders want to see a total debt service ratio that’s less than 40% of your monthly income.
Attend a first-time home buying seminar or talk to a credit counselor who doesn’t work for a lender. You can research your options without being influenced by someone who has a financial interest in the home or loan you choose. The U.S. Department of Housing and Urban Development offers free housing counseling and seminars.
Check out government resources. HUD also has a helpful webpage, Common Questions from First-time Homebuyers, which provides additional resources for first-time buyers, including special financing options and HUD programs.
Select your lender and get pre-approved. When you’ve done your research and are ready to move on to the next step, visit a lender, understand the loan choices that would be available to you and, once you’ve determined the most suitable loan, get pre-approved for that loan.
Since you’ll already know how much money you can borrow, you’ll know what price range you should look at and will be able to move quickly if you’re bidding on a house that has several interested buyers. A lender’s pre-approval would still be subject to a final verification of your credit and a satisfactory appraisal, but it’s a big step toward becoming a homeowner.
If you’d like to find a professional to help you find or finance your dream home, visit the Home Builders Association of Greater Chattanooga online directory at www.HBAGC.net.