RSS

What First-Time Homebuyers Need To Know!

February 16, 2012

Blog

Buying your first home is a dream come true–The American Dream, in fact–and as exciting as this milestone is, there are certain things you need to consider to be ready for this once-in-lifetime experience:

 

Set the Stage: Time to get real if you are going to buy a house. The mortgage banker will know your credit score and you should too. A great score is 850, a low score is 300. There are three credit bureaus whom you can contact: Equifax, Experian to find out your score for a fee or you may join a site like Quizzle.com who will give you your credit report for free.  Even though it’s a pain, your credit score sets the stage for a successful journey.

Tip:  Make sure to pay all of your bills on time, pay off any debts you can, and keep your credit card payments low.

 

Have a firm foundation:  Now it is time to decide on a down payment.  Be realistic (and don’t stop paying your rent yet). How much cash can you scrape together from your own assets? Are your parents willing to pitch in?

Tip: To avoid extra costs an ideal down payment of 20% is ideal, but most people pay 5-10%

Have all your ducks in a row:  In order to sit down with a mortgage banker, you will need your tax returns (including the W2’s or 1099’s that show your income), pay stubs, bank statements and any investment accounts you own.

Tip:  It is a good idea to be able to show your assets, income, and taxes for the past 3 years.

Know the lingo: Don’t confuse pre-qualified for pre-approved.  Knowing the difference between these terms can save you a lot of time and headaches.  Prequalification is an unofficial statement of what you can afford.  What you actually need is a “pre-approval” (these take a lot more paperwork) but with your pre-approval letter, you will know your true price range.

Tip:  You can use prequalification calculators on the Internet but it is best to deal with a mortgage broker to make sure everything is done properly.

 

Do your research: There are different mortgages out there so be sure to do your research and talk to someone about what option works best for you.  The most common mortgages when buying a home are a 30-year fixed rate mortgage (FRM), an adjustable rate mortgage (ARM), an FHA loan (for moderate-to-low income homebuyers) or perhaps a balloon mortgage (where after a period a large payment is due in one lump sum) may be right for you.  Have thorough discussions with whoever you chose to use for your mortgage about this subject and keep asking questions until you clearly understand what obligation you will be committing to when you sign each type of mortgage.

Tip:  Think long term when trying to find the best-fit mortgage.  How long do you plan on living in the home?  Will your income change in the next few years (a growing family, wanting to go back to school)?

 

Time to crack open the piggy bank:  Now it is time to determine how much house you can actually afford.  Falling in love with a house only to discover it is out of your price range is a frustrating—and all too common—happenstance for the first-time buyer. Save yourself some grief and learn beforehand how much house you can handle. Try Century 21’s affordability calculator to get a ballpark figure.

Tip:  CNN Money says that the rule of thumb when trying to figure out how much you can afford to spend on your home purchase is 2.5 times your gross annual salary.

These are the beginning steps to start taking if you are seriously considering of buying a home, but there are other things that need to be done and considered when making what could be the biggest investment you might make in your lifetime. That is why we will be offering more tips and knowledge on this process in upcoming blogs.  So stay tuned!

Advertisements
, , , ,

About century21affiliatedchicago

Century 21 Affiliated-Chicago (“C21AC”) is a full service real estate brokerage firm located in Chicago with a focus on residential and commercial properties. Our agent base and management team includes a wide range of specialties serving customer needs across the ever changing real estate landscape, with expertise in many niches, including REO transactions, investment sales, bulk purchasers and sellers, commercial product and traditional residential transactions. C21AC is part of Century 21 Affiliated (“Affiliated”), a top 5 franchisee in the Century 21 system with over 30 locations across the Midwest and over 32 years of history. C21AC entered the Chicago market in February 2011 to re-launch the Century 21 brand in the downtown area and to bring a proven operating platform to the large and fragmented Chicago real estate market. At Century 21 Affiliated, the customer comes first. Our complete commitment to delivering top-notch customer service to our clients is what distinguishes us from our competitors and makes us such a powerful force in the real estate industry. Specialties Residential Sales, Commercial Sales, Short Sales, Bulk Sales, REO's, Leasing, Business Services

View all posts by century21affiliatedchicago

Subscribe

Subscribe to our RSS feed and social profiles to receive updates.

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: