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Buying a house is typically the biggest purchase couples make. Learn how you can get the best deal with your house and mortgage and save tens of thousands of dollars!
Saving Enough to Buy a House
Are you two getting ready to start house hunting? Congratulations!
When we were looking for our current house, I remember the excitement of visiting and touring places.
Even though I'm a personal finance writer, I have to admit that the paperwork for preapproaval letter and looking at mortgage documents were a bit intimidating.
Thankfully we had a great team that answered all of our questions so we signed the papers to buy we felt confident about our home.
And now three years later, we still do.
We have a home that we love that's also affordable enough that we can take care of other goals and dreams.
If you're thinking of buying or on the hunt for your next place, I want to share some great advice from a professional.
They came through and one of their mortgage loan officers took the time to answer my questions about buying a home and getting a mortgage that works with your budget.
In this episode we get into:
- what mistakes to avoid as a first-time homebuyer
- typical costs of being a homeowner (beyond the mortgage)
- what exactly are Mortgage Interest Rates, APRS, Origination Fees, and Points
Hope you enjoy!
What mistakes have you seen first-time home-buyers make when purchasing?
While saving for a down payment is a necessary step if you want to buy a house you can afford, there are other expenses you need to be aware of.
Preparing ahead for these costs will make the process go a lot of smoother for the two of you and your budget.
- Failing to plan. We encourage you to sit down with a lender first before starting the home buying process. Get pre-approved before you shop
- Not working with a good realtor. Have a buyer’s agent, rather than calling the seller’s agent based on a sign from a home you saw off the street.
- Not getting all the recommended inspections. Again, a good buyer’s agent can guide you through the process, and help you choose the inspections that will best protect you
- Not Tapping into your network. Look to family and trusted friends for recommendations for both your lender and an agent.
Besides the down payment, what are some typical costs that home-buyers needs to plan and save for?
- Moving expenses
- turning on utilities
- furnishings, appliances
- maintenance items / tools
- sometimes there are repairs that are needed that the sellers didn’t cover
One bit of advice we give our members is to avoid buying things before closing, especially if you are using credit, because the added credit balances could affect their final credit check prior to closing the mortgage.
Consider whether they have to buy out the remainder of a lease if they are renting.
What numbers should first time buyers think about and run BEFORE they shop around for a lender?
Start with the lender in order to get an understanding of how much home you can realistically afford.
Go in knowing how much you spend on household and reoccurring expenses now, including rent; how much they owe on other loans and what your disposable income is.
Shop lenders for the first time homebuyer program that works best for you. Look for a lender that’s willing to hold your hand through the process.
Mortgage Interest Rates, APRS, Origination Fees, and Points
Besides saving for your house, it's important to understand all the terms of your mortgage. That means becoming familiar with the jargon that lenders use.
When shopping around looking at various lenders' sites, typically I see the interest rate and APR given. What exactly is the difference between the two?
APR is a tool to standardize the comparison from one loan to the next. It is the annualized cost of the loan, including all of the interest and lender’s fees.
The CFPB recommends that borrowers should always use APR for the best comparison. The interest rate is a component of APR.
What are origination points and how do they work?
Origination and points are two different things. Origination is the lender’s fee and covers a variety of the services they provide in preparing the loan.
Fees range from 0 to 1% of the total loan. Discount points are prepaid interest and are used to buy down the rate. Both origination fees and discount points vary from lender to lender.
Thoughts on Buying a House
What other questions do you have about buying a home or mortgages?