Purchasing a home is one of the most significant achievements in a person’s life. As a homeowner, you are making a huge investment. This is a new and exciting phase, but it can also be a challenging experience. To simplify the process and help things run smoothly, first-time homebuyers need to pay attention to certain important factors. Here are some important tips to guide you through the process of purchasing your first home.
- The Key Financial Aspects of Buying a House
- Down Payment
- Closing Period
- Moving In
- Monthly Payment
Start saving money to purchase your house as soon as possible. For many people, purchasing a home is the largest purchase they will make in their lifetime. You want to accumulate enough savings so that you can make that down payment. Only the wealthiest people can afford to pay cash for a home, so you will likely have to finance your purchase through a mortgage loan. Mortgage loans can be complex because they include multiple parts.
Your down payment is the amount you pay to secure your loan. The more money you include in your down payment, the smaller your monthly mortgage payments will be. Remember that the loan will also include interest. Generally, the bank will ask you to at least pay 3% of the total price upfront to be approved for the loan.
Lenders may ask you to pay at least 20% upfront if you can afford it because it drastically reduces your mortgage payments. You also have to consider your loan to value ratio. Beware of Private Mortgage Insurance. PMI is a policy your lender may have you take out because they believe that not paying a higher down payment is a warning sign that you don’t make a lot of money. If you don’t have a high income, you may be viewed as a high-risk client. Your lender wants protection if you are ever in a position where you cannot make payments. PMI adds an extra charge on top of your principal. If you make higher monthly payments, you could stop paying PMI.
Your closing costs include the fees to help finalize your mortgage. Most of the closing costs are your responsibility, but the seller does handle some of the fees. You also have the option to negotiate closing costs with the seller if you have concerns about the home. A big part of the closing costs revolves around home inspection. You may use an inspector to learn more about the home before you purchase it. The average closing cost rates are at about 2-5% of the loan. Some of the common items in the closing costs are property taxes, title fees, appraisal fees, and your application fees.
There are a lot of moving expenses to consider. You will have to buy boxes to help pack your personal items. Purchasing renting equipment to assist in the moving process costs money. You also have to consider fuel costs. Moving during a weekend is more expensive than moving during the weekdays. We recommend opting for professional movers’ services to help you if possible to ease the entire process.
Your mortgage is your monthly payment. That’s comprised of your principal, interest, and your property taxes. Your property taxes vary according to the state that you live in. Check with your local government. Your mortgage payment might also include homeowners insurance and Homeowners Association fees if applicable in your neighborhood. Additionally, you should ensure that you have a strong home insurance policy to cover any property damage, as well as your belongings.
These tips can help you enjoy peace of mind as you finalize purchasing your first home. If you have any questions, contact our team of homeowners insurance professionals at Duane Weber Insurance to assist you.