I love first time buyers!
This is a step by step guide on the buying process...
Buying a home doesn't have to be a daunting task. Most first time buyers will purchase a home between $110,000 and $135,000. That's just a general guide. Some will buy for more or less.
Your first step is talking with a banker or mortgage company to see how much buying power you will have. This will get you to first base. Almost all homes are financed to some degree or another.
How much cash will you need to buy a home? That depends. Some programs will get you in for very little cash (perhaps $1000 or less) and you may be paying less than rent! Most first timers will go FHA financing. That is an insured program by the Federal Housing Authority. They generally require 3.5% down but there's alternatives to that also.
Before we go further, let's discuss some terms:
- Mortgage-a long term loan to finance you home. It is usually 30 years and a low interest rate, say 4.0%.
- Closing costs-these are costs associated with acquiring your loan, prepaid charges, appraisals, title insurance, inspections, home owners insurance and more.
- Appraisal-a 3rd party evaluation of value to justify your loan.
- Loan to value ratio (LTVR)-the amount of the loan divided by the value of the home. For example, if you bought a home for $100,000 and put down 10%, you would borrow $90,000 and have a 90% LTVR. $90,000/$100,000=90%.
- Discount points-these are interest charges paid up front in order to reduce the cost of your long term rate. Points are a good thing IF you plan on staying in your home for a long time.
- Origination fees-a fee charged by the bank to do all the paperwork, verifications, preparations and underwriting of your loan (ensuring it meets the lender's criteria).
- Title insurance-this is an insurance policy that protects your "title" to the property from existing and future claims against the property.
- Prepaid charges and escrow-these are initial deposits set up to pay for your homeowners insurance and property taxes. The escrow pays these for you.
- Inspections-these are 3rd party inspections of the property to protect you from hidden problems. The inspector is licensed and will evaluate structural and mechanical conditions of the home. He may also evaluate Radon, termite and mold (this is usually done by a mold lab).
- Closing-the date when you actually own the property and all documents are signed. You usually get pssession that day.
