Here's What You Need to Know
Your first homebuying experience is one of the biggest financial decisions you can make. It’s a significant process that calls for plenty of background research and knowledge, so it’s only natural that the process can seem intimidating and stressful rather than exciting. Unfortunately, nobody teaches this in school.
The good news is that there are dedicated professionals who can guide you through your first homebuying experience. We understand the ease of doing things online, but it’s important to have face-to-face conversations about what you need to know before buying a house. The best lenders will ease your fear of buying a house and are prepared to answer your homebuying questions.
Going Beyond the First Steps
Today’s young homebuyers are more likely to shop online first. They believe talking on the phone can be inefficient — and even intimidating. But when they need to have a conversation with someone from a loan application or website, they might find themselves overwhelmed: There’s no easy way to get all the answers you need online.
For this reason, it’s crucial to have in-person conversations and investigate before diving into homeownership. Whether you’re a single person or a family, buying a home is a solid investment and a sensible goal. So what do you need to consider before deciding you’re ready?
- Think about what kind of house you’ll need in the long run. First-time buyers tend to move from their single-family home sooner than those who’ve previously owned a home, and this is often because they miscalculated future needs.
They don’t want to stretch any limits, so they initially buy what they can afford. A three-bedroom, one-bathroom home might save $15,000 in the short term, but it won’t feel so cozy when two children enter the picture. To avoid this, look into the future and estimate your needs down the line.
- Don’t chase the lowest possible payment. We all want the lowest payment, and many people look to buy foreclosures because they think it’s a great deal. Nine times out of ten, it’s not. The price tag might be $40,000 less than the neighbor’s house, but that could be because it needs $80,000 in renovations. Before diving in, consider whether you have the time and experience to tackle a fixer-upper. If not, it might be time to consider different options.
- Understand your closing costs and down payment. A lot of people still think you need to put 20% of the sale price down to buy a house, but it hasn’t been that way for decades. Today, the Fannie Mae and Freddie Mac programs offer 3% down payment mortgages, and the Federal Housing Administration offers a 3.5% down payment loan. Besides this, the Department of Veterans Affairs and Department of Agriculture also have loan programs requiring no money down.
However, it’s still important to remember that even with a no-money-down loan, there are still closing, appraisal, title, and escrow costs along with homeowner’s insurance fees. We try to work with agents to include these in the sales contract, but you should be aware of these standard transaction features.
- Know the basics of your lending profile. You don’t need to have your credit portfolio memorized, but it’s helpful if you can paint a summary of it in broad strokes. Your lending profile isn’t only about your credit score. Factors such as income, assets, and medical bills influence your ability to make monthly house payments, and taxes and insurance will play a part as well.
With all of this information, lending experts can help you determine realistic expectations for monthly payments. We handle Conventional, FHA, VA, and are the local expert for USDA financing.
Are you ready to buy a home? Our mortgage department at American Bank of Missouri is ready to help you make this life-changing decision. Even if you’re on the fence, we can help you find the answer. Come talk with us when you’re ready.