Whether it’s your first home, or your dream home, buying a house is a big, not to mention stressful, deal. But it doesn’t have to be! These are some things to keep in your mind and to plan for when buying your house!
- Have Money for a Down Payment
Some types of loans or special promotions don’t require you to have a down payment, but many of them do. The standard down payment for a conventional loan to avoid PMI (Private Mortgage Insurance) is 20%, so if you were buying a $100,000 house, you would need $20,000 to put down on it. One of the loan types that vary with its type of down payment is a FHA loan, the minimum for it is 3.5%. There are many different factors that determine what home loan type will best suit you, but you should be prepared for a down payment in case you do have to provide one.
- Don’t Forget About Closing Costs
So many of our lenders say this is an issue they run into, many people forget about closing costs! These costs are made up of things such as, the loan amount, appraisal, title work, underwriting and other miscellaneous items. Standard closing cost are typically around $2,000-$2,500. Sellers are allowed to pay a percentage towards your closing cost to aid in that area. Always check with your lender to determine if that’s a possibility for the loan product you were approved for.
- Taxes, Insurance, and Escrowed Funds
Property taxes will be prorated through the day of closing for the current year’s tax bill. Property taxes are determined by a property assessment and the tax rate is set by the location that you buy the home. Tax varies by jurisdiction, so even if you move a few miles down, if you are in a different county or state, your taxes may be different. On a purchase transaction, you must be prepared to pay your annual premium towards homeowner’s insurance at closing, as well as a deposit towards your escrow account calculated from the tax bill and the homeowner’s insurance premium. Regulatory laws require each escrow account to have a 2 month cushion in their account at all times. If your taxes/homeowner’s insurance premium fluctuates in cost up or down then that in turn reflects the same effect in your escrow account. This is why your monthly payment can fluctuate from year to year when taxes and insurance are tied into your monthly payment.
- Don’t Open Any Trade Lines
There are a lot of factors that go into securing a loan when buying anything, such as, your debt to income, credit score, and a home loan is no different. When you are in the process of getting a home loan, one of the things that can slow down or stop the process is opening any trade lines. Trade lines of credit can be anything from opening a credit card account to buying a new car. These new accounts could affect your debt to income or your credit score, which in turn could default the loan approval. Always check with your loan officer before making any large purchases or opening any new trade lines prior to closing.
- Don’t Switch Jobs
Much of the loan approval process is based off of the amount of money you bring home each month and the stability of your job. Even if you are switching a job to make more money, the instability can affect your approval, especially if you are moving to a new trade. If you know that you are going to be switching jobs, it may be best to wait to apply for a home loan. But if you don’t have the advanced notice, let your loan officer know as soon as possible to see what steps might be necessary before moving forward!
- Ask Questions!
If you are uncertain on an aspect of the process, or want clarification, just ask! Our lenders have done and seen almost everything in buying a house, and they are more than happy to give you an answer. Often asking a question can save you time so later you aren’t having to back track. We try to get you into your house as seamlessly as possible!