- Save up a significant amount of money for a down payment. Having a large down payment has several benefits, including:
- Lower interest rates
- More lending options
- Lower monthly payments
- Avoiding mortgage insurance
It is typical for lenders to require at least 10% down, but a 20% down payment will give you the most significant benefits.
- Practice paying your estimated monthly payment. If you are renting a home, you may already be in a good habit of paying a monthly payment. If not, it may be very helpful to start making a payment to a savings account in lieu of the estimated monthly mortgage amount. This helps you understand budgeting and saving for emergencies.
- Save up six months of mortgage payments in a savings account. With the economic changes that have happened over the last year, it may be very beneficial to have 6 months’ worth of mortgage payments in a savings account. You never know when a there could be a pandemic, an accident, or an illness that leaves you unemployed.
- Understand your credit score and making sure you have an optimal score for the greatest lending situations. If your credit needs some work, prepare to spend several months repairing it. As with a down payment, a higher credit score will provide the best loan rates and packages.
Understanding Home Maintenance and Repairs
- Home Maintenance. Owning a home is different than renting, in that you have to take care of your investment, instead of a landlord taking care of things. Mechanical things like the furnace, water heater, and AC unit have to be serviced or have yearly maintenance done. Some big box stores like Home Depot or Lowe’s teach classes, or have great education on their websites. There is always Google and YouTube as well.
- Home Owners Manuals and Warranties. Keep your product manuals and warranties in a central location. Most manuals come with troubleshooting or customer service numbers for reference.
- Find a reliable repair man or be willing to do it yourself. Homes can take a beating; therefore, a reliable, honest handyman/woman can save a lot of time and money. If you do not have one, be brave and try to take the project on yourself. There are many videos and websites for help with repairing drywall, replacing a faucet, changing light fixtures and many other repairs. Doing repairs yourself definitely saves money, but often take more time.
Finding and Building a Relationship with a Mortgage Company or Financial Institution
- Most likely you know someone who has purchased a home or is in the lending industry. Ask around and get opinions about different institutions for mortgages. It is always beneficial to have a standing relationship with someone in lending – someone who knows your situation and is looking to get you in the best situation.
- If you already have a financial institution where you do all your banking, check to see if they do mortgages. There are also mortgage brokers who deal solely with home mortgages.
- Check around and do lots of research to make sure you find someone that works for you.
Purchasing Your Home with an Agent or On Your Own
- If you are working with a realtor, they should be working to find the best home option for you. A realtor is very helpful if there are not a lot of homes on the market. Realtors often get knowledge of homes before they are on the market, and if they know what you’re looking for, it could save time and avoid bidding wars. Nowadays, it is almost necessary to have a realtor and be pre-qualified in order to view a home for sale. It is possible to find a good home, within your budget and the best situation for you on your own. You just have to familiarize yourself with the current market in your area, be pre-qualified with your lender and know what you’re looking for. Here are a couple of questions you can ask:
- What are the homes selling for per square foot?
- Does it come with a home warranty?
- Is the home listed with an agent or owner? This could affect the price.
- Does the home meet specifications for your loan? Certain loans have different criteria that must be met. (For example, FHA or VA Loans)
- Are there items that would need to be repaired to pass the home inspection?
Buying a home can be very overwhelming. There are many people in the industry willing to help. Hopefully these few tips will help get you on your way to a successful home purchase.
If you need any help with purchasing a home or getting lending, contact our Mortgage Department at 801-399-9728.