Home Buyers’ Biggest Questions
Buying a house is not easy, especially for first-time home buyers. Between buying a house and applying for a home loan, there’s so much to know. In today’s market, there is a lot to worry about. Inflation has caused mortgage rates to rise, which adds to the cost of buying a house. While the costs of buying a home are increasing, the housing market will not crash and is set to remain in a strong position for the foreseeable future. Home buyers can still buy their dream home with full confidence. However, it is important to ask the right questions to make sure you know what you’re in for. Many home buyers do not know the full costs that go into buying a house. The team at Peoples Choice Mortgage is here to help you know what you need to ask about down payments, mortgages, and other potenital fees.
Asking the Right Questions When Getting a Mortgage and Buying a House
Buying a house is not as simple as offering a home seller the amount they asked for, sign papers, switch keys, and then you are done. Even cash purchases have a lot of moving parts. If you are financing your home purchase with a home loan, then things get even more complex. First-time home buyers and first-time mortgage applicants should think about the questions they need to ask to feel comfortable in the process and get the best deal. Here are some of those questions …
How Much of the Monthly Budget Should Mortgage Payments Take Up?
Home loan payments should account for no more than 30% of your monthly budget. To budget for these payments accurately, all you need to do is add up your monthly income and your monthly expenses. Then, add mortgage payments and make sure they are not more than one-third of your overall costs. The tricky part of making a home buying budget is all the other stuff to consider regarding the home purchase.
How Much of a Down Payment Do You Need?
Many think you need to set aside 20% of a house’s value for a down payment. However, this is a myth.Several loan programs allow you to put less than 20% down for a home loan. One of the methods is getting an FHA loan. FHA loans have backing from the federal government and allow people who have less than perfect for getting their home. In turn, this will enable you to be flexible with your budget and put a smaller down payment. If you qualify for an FHA loan, reduced costs range from 3.5% to 10%. The 10% applies to people with a credit score ranging from 500 and 579. The 3.5% is for credit scores that are at least 580.
Applicants who have military service may qualify for a VA loan. Also federally backed, these loans do not require a down payment. They also do not have any credit score requirements. If you qualify, these loans are outstanding for budgeting your new home.
Although all of these loans are government-backed, many conventional home loan products also require less than a 20% down payment. If you want to know exactly how much you need for a down payment, speaking with a mortgage broker can take out the guesswork. You can get a complementary mortgage qualifier that will tell you what you would need at this moment.
What are Closing Costs?
Closing a home is the last appointment where you officially buy the property. On this day, you will sign all of the paperwork, pay your down payment, and pay your closing cost. Closing costs are separate fees ranging from 2-5% of the total cost. They can include title insurance, origination fees, underwriting fees, document preparation fees, and other expenses.
To effectively budget for these costs, you must read the entirety of the closing agreement. Go through all of the paperwork before you go through with the deal to know how much money you need. Luckily, the team at Peoples Choice Mortgage is here to walk you through the process. We can help you understand the closing costs and find a home that fits your budget.
Final Thoughts
One of the hard parts about doing anything the first time is that you do not know enough to know what you do not know. First-time home buyers often have to face this exact problem. Applying for a home loan and buying a house can be overwhelming without help. The team at Peoples Choice Mortgage is here to give you all the help you need and make buying a house as simple as possible. We will help you ask the right questions every step of the way so that you feel comfortable and confident in every decision you make. If you want to buy a house, but your first question is where to start, then the best answer is to contact us. We will answer every question you have and do everything in power to make your home buying journey successful and enjoyable.
