Are you thinking about buying a new home? Is it your very first home, or has your family outgrown your old home? Whatever your circumstances may be, the outcome is the same: you want a new house! We hope that you will find this information helpful as you start the process of buying a home.
The First Step to Buying a Home
The first step to buying a home is talking to a Bank of Sullivan lender. We call this step pre-qualifying for a home loan. We’ll help you start the discovery process, get an idea how much you can afford, help you understand your credit, understand the different loan products available to you, and what you can expect as you start looking. A pre-qualification doesn’t guarantee that you will get a loan, but it may be expected of you when you make an offer on a home. It assures the realtor and seller that you are serious about buying, and that you have taken the right steps toward buying a home; starting with financing. At Bank of Sullivan, we want the process to be fun and exciting, so we’ve put together a special packet of information and tools especially for the home buyer.
What You Can Afford
How do you know what homes to look at if you don’t know what you can afford? It is nice to look at more expensive homes, but sometimes it isn’t very realistic if you can’t afford to go to the movies anymore once you are living there.
- The first step is to determine your gross monthly income.
- Next, determine your total monthly debt. This does not include utilities, car insurance, or daily living expenses.
- Your monthly housing expense, including taxes and homeowners insurance should not exceed around 28% of your gross monthly income.
- In addition, your monthly housing expense plus your other total monthly debts cannot exceed 36% of your gross monthly income. Each of us has a unique situation and different loan programs may be more flexible than the suggested guidelines, but this will give you a starting point. At Bank of Sullivan, we have an easy chart that helps you to calculate the guidelines above, and we are always happy to help you through it.
Tips For The First Time Homebuyer
- Fix your credit. Taking the time to discuss any credit issues with a qualified Bank of Sullivan Lender may mean waiting a few months to buy a home, but it may also help you afford more home, and get a better interest rate.
- Look for first time home buyer’s programs. Some are tailored for people with slightly damaged credit, and most can help people who haven’t saved a lot for a down payment.
- Get pre-qualified! Many first time homebuyers confuse getting pre-qualified with getting pre-approved. Pre-qualification is a pretty casual process, where the lender will look at your credit, discuss your income, and tell you how much home you can afford based on the information you have given. It doesn’t hurt or cost a thing to be pre-qualified, and will help make the process of buying a home much easier. Pre-approval will happen after the lender has checked your credit further and verified information about your employment, assets, and other information.
- Don’t borrow too much money. Buying your first home doesn’t necessarily mean that you should get the biggest loan (and home) that you can qualify for. If you start out smaller, you will give yourself a chance to realize how expensive owning a home can be, and you won’t have to forgo vacations, retirement savings, recreation, or new clothes to afford your home.
- Trust your lender. At Bank of Sullivan, we have the same standards and ideals that the Bank has had for over 100 years. We are your friends, our kids go to school together, we shop together, and we have your best interest at heart. We are your community mortgage lender, and want to stay that way. You can trust that your loan is the best that the industry has to offer, including trusting your rate and fees.
- Plan for closing costs. Mortgages aren’t free. There are fees involved with buying a home, and you should be prepared to pay for those fees in some way. Each loan program has guidelines that allow for the fees to be paid in full or in part by the seller, the lender, a relative, from a loan, or your 401K. You should always understand what your expected closing costs will be and how much of that you might have to come up with on the day of closing. A good faith estimate will be provided to you after you apply for a loan, and at Bank of Sullivan, we will also give you a good idea while you apply. We don’t want surprises any more than you do!
- Make sure that you have cash on hand after closing. We don’t want you to become so tapped out buying the home that you have nothing left. There will be unexpected expenses that occur when you own a home, and it helps if you can be somewhat prepared. It is a good idea to have 3 months reserves (equal to 3 months worth of expenses) after closing to help you handle the added costs of owning a home, and help with your stress levels too! Besides, you want to order pizza on moving day!