1) Understand how much you can afford in a monthly payment. How do you know what you can afford? My advice is to look back at the last 6 months - how much have you paid in rent each month? Was it comfortable? If you’re looking to pay more on a mortgage, were you able save the difference these past few months?
2) Understand there is more to the monthly payment than just the mortgage. Many people pull up online calculators and get excited when they think they can buy a $300,000 home for $1,200 per month (with 20% down- that is the principle/interest payment). But, in addition to the mortgage payment, you have property taxes, homeowner’s insurance, mortgage insurance (if you put less than 20% down), and may have a HOA if buying a condo or townhome.
3) A down payment can save you money - but also cost you money if you’re waiting to save up a down payment before buying. Many people believe you need 20% down to buy a home. This is not true. There are zero down programs. 3.5% down (FHA) or 3% or 5% (conventional) can get you into a home. Yes, you can save money by saving up the 20%, but I watched a couple wait a couple years so they could save up the 20%. Yes, they saved $100 per month in mortgage insurance, but their home literally cost $50,000 more when they finally pulled the trigger and bought.
4) Work with a good real estate agent. A good real estate agent is invaluable. I am out in the market each day. I know the home values. I know how to put together the contracts and I am watching your back. The best part, a buyer’s agent costs the buyer nothing because I am compensated by the seller.
5) Understand your costs. When buying a home, your first cost is the earnest money - typically $1000-5000 that you give your realtor (or title company) when you go under contract. (This earnest money can go toward your down payment and/or closing costs). Then you will have a home inspection that if you choose to do, will cost $300-600. Some lenders require an appraisal fee up front.
Kim's Real Estate Chat
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