As a first time home buyer, what is my first step?
Right now, the real estate market is craziness! For the first time home buyers, it can be a bit intimidating to even attempt to take the leap to purchase a home. With this being said, you need to be sure to have all your ducks in a row before finding your dream home. One of the most asked questions for first time home buyers this last year was, “What is the first step in buying a home?” The answer: Get pre-approved. With all the competition right now, that pre-approval letter will save you time, and allow you to make that offer so much quicker. This also gives you an idea of what you can afford. TIP: Before you put in an offer on your dream house, it’s a good idea to find out how much the property taxes and insurance will be and add that into your monthly payment estimate. Also, it’s a good rule of thumb not to let the monthly payment exceed 25% of your take home pay. This allows you to have more money to put back in case of emergencies.
How much do I need for a down payment?
Another commonly asked question: How much do I typically need for a down payment? This can differ based upon the type of loan that you get. With a conventional loan, you will usually need between 10-20% of the loan amount. With an FHA type of loan, you usually only need around 3-5%. This of course all varies, but you get the idea. You can also avoid Private Mortgage Insurance (PMI) with a 20% or more down payment.
How much are closing costs?
Finally, how much are closing costs, generally speaking? You can estimate around 3-6% of the loan amount that you’ll need to bring to closing. Don’t worry. Every buyer should receive their Closing Disclosures with all detailed final loan costs within three business days prior to closing. This enables the purchaser to review the final loan costs and terms and ask any questions before closing. If you need an estimate before this, always be sure to speak to your real estate agent.