Becoming a homeowner can seem daunting. But you can start by asking the right questions.
the thought of buying a house can be anything from exciting to dispiriting. The decision is one of the biggest that a person will make in a lifetime, and it brings question after question to mind: How do I begin? Who can advise me? Where do I want to live? How does a mortgage work and how do I go about applying for one? What happens after that? Here, we answer some of these questions to give you some straightforward guidance about this big commitment.
Who do I talk to first?
There are several professionals that you will need to work with when buying a home, including a real estate agent, a mortgage banker or broker and an attorney. Turn to a trusted source (family, close friend, business associate) to find the best team of people — we’ve got some of the best in the Metrosource directory (searchable at metrosource.com).
When it comes to real estate, “my job is to help people find their ideal home in the best location and make the process as stress free as possible,” says William D. Moye, Relocation Specialist/Senior Sales Agent at BOND New York Real Estate, “I always recommend to all of my customers to have at least six months savings plus the down payment when buying a new home. You never know when the furnace or roof might need to be replaced. Also co-ops usually have even higher requirements of reserves after closing.”
How much cash do I need?
You’ll want enough to at least cover your down payment and closing costs, and don’t forget to leave enough in your bank account to cover any emergencies that might arise once you own your dream home. Traditionally, lenders have required down payments equal to 20% of the home’s purchase price (but special programs allowing down payments as low as 3% are available). To get a sense of what that translates to: putting 20% down on a $300,000 home would require $60,000 in the bank — plus an additional $9,000 or so for closing costs.
How much can I borrow?
Contact a lender to get pre-approved or pre-qualified for a mortgage. The difference between pre-qualified and pre-approved is whether you allow a credit check. If you have done multiple credit checks in the last three months, it can lower your credit rating. Getting pre-qualified doesn’t require you to accept the loan; it’s just a way of showing real estate agents and sellers that you’re serious. It also provides a more realistic picture of what you can afford.
how good must my credit be?
When you’re applying for a mortgage, your credit score has the most meaningful impact on the rates you’ll be offered. Typically, the higher your score, the lower the interest rates you’ll be offered by lenders. As we discussed in our finance column in the last issue, a score of 750 or higher is considered best.
Where do I want to live?
One of the most important considerations in purchasing a home is location. By choosing an up-and-coming neighborhood which is popular with gay people who are moving in and making upgrades, you can benefit from getting a deal on a fixer-upper and contribute to improving the neighborhood. But as the neighborhood does gentrify, your property values will rise, which increases the value of your investment — and your formerly funky neighborhood may drive out the very shops and authenticity that gave it such distinctive charm in the first place. how do i get a mortgage?
Let’s say you’ve found a home and your bid has been accepted. It’s time to start the process of securing a home loan. But what exactly is a mortgage? Essentially a mortgage is a loan in which property or real estate is used as collateral. The borrower enters into an agreement with the lender (usually a bank) wherein the borrower (you) receives cash up front and makes payments over a set time span until the lender has been paid back in full. Simply put: you promise to pay a certain amount for a property, and if you can’t, that property goes back to the bank.
Different mortgages make sense for where you are in your life. Nowadays it’s less often like it was for your grandparents who stayed in one house their entire lives. You may start with a small studio apartment and, as your life changes, graduate to something bigger
“With so many types of home loans available, choosing the one that’s right for you can be overwhelming. It’s a good idea to speak with an experienced mortgage broker who can go over all of your options,” says James Kroll, Producing Branch Manager from LoanDepot. “We are your partner in the home buying process and are here to find the best solution for you.”
“Real estate is a great tool for growing your net worth,” Kroll continues. “What you can afford now and what you will grow into five or ten years from now can be a big difference. Ultimately, knowing where to start and who to speak with will make the home buying process a financially beneficial one.”
Whatever else you do, make sure you’re following the instructions of the professionals so you don’t get overwhelmed by the process.
Last modified: May 14, 2018