If you’re hoping to move into your first home within the next six to twelve months, now is a great time to start getting your finances in order. If you’re reading this, you’re probably looking for some help with figuring out where to start the process.
Perfect.
We know which questions you’re asking, and we’re glad to answer them.
First Things First.
Schedule a meeting with your preferred lender.
Meet with your mortgage lender before you begin to shop for your new home. Getting pre-qualified for a loan will help you in making good decisions regarding the purchase of your home. While this isn’t mandatory, speaking with a representative who has multiple years of experience in the lending industry can help you get your funds in order before it’s too late.
What Percentage Should I Save for a Down Payment?
Ideally, a buyer would have 20% of their purchase price for a down payment, but this isn’t always a possibility. Typically, you should always be prepared to save at least 5% of the cost of your new home for a down payment. The suggested down payment totally depends on the type of loan you receive. Estimate your new mortgage payment today.
What are Closing Costs?
Closing costs are the costs incurred to purchase your new home, most of which are collected and paid at closing. They include such things as attorney fees, recording fees, appraisals, title search costs, etc.
With most home loans, you can expect to spend between 2-5% of the purchase price on closing costs. While it’s a case-by-case basis, it’s a considerable fee that every interested homebuyer should prepare to pay when trying to determine their budget.
What’s a Gift Letter?
A gift letter is a documentation that is necessary when you are receiving a part of your down payment as a gift from a friend or relative.
Sometimes home buyers will receive a monetary gift from a close relative, like a parent or grandparent or even a sibling. For it to be accepted as part of your down payment, you and the person providing the gift must be prepared to document the source of the funds for the gift.
When Should I Furnish My New Home?
Your lender will take all expenses and credit purchases into consideration when determining the loan amount you qualify for. Because of this, you should be cautious about buying anything that requires you to use your credit card or open a new loan. If your score and DTI (debt to income ratio) is changed by this purchase, the loan amount, you are approved for could be directly affected.
Your best bet is to wait to buy new furniture (and anything else you need) until after closing on your loan. That usually takes around 3-4 weeks. While it always depends on what type of loan you’ve been approved for, in general, most lenders try to adhere to the closing date indicated on the purchase contract.
Should I Wait To Switch Jobs While I’m in the Process of Purchasing a Home?
Don’t quit your job just yet.
Have a discussion with your lender first to determine how a job change may affect your loan application. We will work closely with you to make sure you are qualifying for the right loan, under the right conditions.
What Can I Do to Prepare?
The best action you can take as you wait to be approved for a home loan is to continue to make all debt payments. Your credit score is extremely important to lenders, along with your debt versus income. You should also continue to save as much cash as you can for your new home purchase. Learn more about preparing for the process in our Mortgage Application Checklist blog.
What If I’m Approved For a Loan Amount that was More Than I Expected?
Sometimes, borrowers get approved for more than they expected. This is because the lender takes into consideration your entire income, not just your take-home pay. You’ll need to make sure you consider the cost of other bills like phone, electric, groceries, childcare, and any other expenses you frequently spend money on before you decide to spend exactly what you’ve been approved for on just your home. A lender who is looking out for your best interest will have a discussion with you about what you feel comfortable paying for your new home.
How Do I know What is the Right Mortgage Loan?
Your mortgage lender can help you determine which loan is best for you. If you can put down 20%, you should consider a conventional loan. If you are unable to put down 20%, your options may still include a conventional loan or other low down payment options such as an FHA or Home Ready loan, which are great for first-time homebuyers. Depending on where you are making your purchase you may be eligible for a USDA rural development loan. Active and retired military members and their families can put down 0% through a VA home loan.
You will also have the option to choose between a fixed-rate mortgage and an adjustable-rate mortgage. This is major determinant of your monthly payment size. Use this mortgage calculator to compare.
Why First Time Homebuyers Choose Field & Main
Field & Main is dedicated to the community and those who live within it. We do what’s best for the customer, no matter what. We ask the right questions and try to put ourselves in our customers’ shoes so that we can place them in the home they want and deserve.
Reach out to a mortgage specialist at (844) 831-0600. or visit a banking center near you.
Apply for a home loan today.
