Closing costs: These are fees you have to pay when you close on your mortgage. They’re based on the individual purchase, but can vary from 2% to 7% of the purchase price of the home, but they’re often split between the buyer and seller. According to Realtor.com, buyers typically pay 3% to 4% in closing costs and sellers typically pay 1% to 3% (you can try to negotiate who pays which closing costs). With some closing costs, you have to use a certain service, but with others, you’re allowed to shop around for a better price. Here are some common closing costs.
With acute shortages of homes for sale in so many markets throughout the nation, getting a preapproval for a home loan is more important than ever. Cash buyers used to give sellers confidence that a deal would close quickly, but fewer cash buyers are shopping right now. And when houses weren’t in such short supply, buyers didn’t face the pressures of intense seller’s markets.
Once you’ve made sure the property is in the agreed-upon condition, you’ll set a date to meet with the required parties. Different areas have different requirements as to who must be present, so you might meet one or all of the following: the escrow or closing agent, the attorney — who could also be the escrow agent, someone from the title company, the mortgage lender, and the real estate agents.
Buying a home is one of the largest purchases you'll likely make, and it's important to make sure your financial house is in order. Start by reviewing your bank accounts and billing statements to get a handle on how much money you're making and spending each month. If you're planning to buy a house with someone else (like your spouse), review their finances as well, and then ask yourself some questions:

As a buyer, just keep in mind that mortgage pre-approval is different from mortgage pre-qualification. Pre-qualify, and you're undergoing a much simpler process that can give you a ballpark figure of what you can afford to borrow, but with no promise from the lender. Getting pre-approved is more of a pain since you'll have to provide tons of paperwork, but it's worth the trouble since it guarantees you're creditworthy and can truly buy a home.

Or better yet, decide how much you’re willing to pay. Just because you can qualify for a larger mortgage doesn’t mean you want to have that kind of payment each month. Use the mortgage affordability calculator to help determine what you can afford. Now is also a good time to research your housing market and start going to open houses in your prospective neighborhood to give you a good sense of what your money will get you.
In addition to having a down payment, a first-time home buyer will need a decent credit score. This three-digit number is a numerical summary of your credit report, a detailed document outlining how well you've paid off past debts like for credit cards and college student loans. A lender will check your score and report in order to estimate the odds that you will deliver your monthly payment to them, too. In turn, they will use this info to decide whether or not to loan you money, as well as how much, and at what interest rate.
As a buyer, you have the right to a professional home inspection before you purchase the house, and you would be crazy not to do it! This is one of the most important precautions you can take before purchasing a home because it keeps you from being blindsided by structural issues or expensive repairs. If the inspection reveals major problems with the home, you can ask the seller to fix the problem, reduce the price, or cancel the contract.
The good news? There is a tried-and-true formula, involving multiple good financial steps and habits, that can lead you directly to the purchase of your dream home, and on a fast schedule, too. The downside is simple and direct -- if you don't follow the home buying formula, your chances of landing a new home are significantly reduced, if not completely eliminated.
Several years ago I remember a friend advising me to purchase a house before I was ready, and now I have been curious about the repercussions of purchasing a house outside your financial capabilities. I appreciate that you specifically pointed out that you should never stretch to buy your primary residence thinking that you can take cash out or flip it for a quick profit in a few years. Thank you for the advice regarding financial planning in purchasing real estate!
Property tax is the amount of money that you are required to pay based on the property’s assessed value. Property tax can be very costly, depending on where you live. This is something you’ll want to consider when calculating how much you plan on spending on your overall homeownership expenses. Property tax payments are usually due annually, but more often than not, they are divided into and included in your monthly escrow payment.
If you're thinking about making an offer on a home, take another look at your budget. This time factor in closing costs, moving expenses and any immediate repairs and appliances you may need before you can move into the home, notes Felipe Pacheco, President/CEO of Avanti Mortgage, who is based in the greater Salt Lake City area. Don’t overlook hidden costs such as the home inspection, home insurance, property taxes, homeowners association fees and more.

Right from an escrow account to real estate attorney, all involved services and entities cost money which can snowball into a big amount. Many such services take advantage of consumers' ignorance by charging high fees. Junk fees, a series of charges that a lender imposes at the closing of a mortgage and is often unexpected by the borrower and not clearly explained by the lender, are a big cost. They include items like administrative fees, application review fees, appraisal review fees, ancillary fees, processing fees and settlement fees. Even fees for legitimate closing services can be inflated. If you're willing to speak up and stand your ground, you can usually get junk fees and other charges eliminated or at least reduced.
Don’t let these unknowns deter you. Research and diligence can unlock the mysteries of the process and enable you to buy your first home without feeling too lost or overwhelmed. Plenty of resources exist to explain the process. This tutorial is a great start. We’ll take you through everything from the simple stuff, like finding a place that you like, to the complicated stuff, like applying for a loan.
Mortgage insurance: If you take out a conventional loan and put down less than 20%, it’s possible you’ll have to pay private mortgage insurance, which protects the lender financially. You can typically request for PMI to be canceled once you reach 20% equity in your home. If you take out an FHA loan, you have to pay mortgage insurance, though you may be able to cancel your insurance once you pay down enough of your loan.
It’s important to pay attention to a home's aging big-ticket items before you even make an offer. “A lot of homebuyers are distracted by how cute a home can be,” Portales says, adding that she makes it her job to point out the age of the roof, air conditioning unit, water heater and more to buyers. Then when it comes time to calculate an offer, you should factor in the cost of those pieces that will need immediate replacement when determining how much you think the home is worth.

This is the day you get your house keys—but first, you have some serious paperwork to do. You’ll set an appointment for closing on your house, and you’ll need to bring your driver’s license, a cashier’s check for your down payment and closing costs (which range from 2 to 5 percent of the home’s purchase price) — and a lot of patience. You will sign and initial dozens of papers.
Buying a home is exciting, especially when you're buying for the first time. In the midst of all of the excitement, it's easy to become blinded by beautiful back-splashes, granite and quartz counter tops, hardwood floors, and fenced-in backyards. While looking at homes that are completely perfect from top to bottom, you may begin to rationalize a larger purchase than you had originally planned for — "This house is perfect for me; it's worth $50,000 extra dollars for me to have a house with enough space in a perfect location," or "We were planning on spending a little bit of money on painting; we can spend $50,000 extra on this house because it doesn't need any work."
How to avoid this mistake: Ask a mortgage lender about your first-time home buyer options and look for programs in your state. You might qualify for a U.S. Department of Agriculture loan or one guaranteed by the Department of Veterans Affairs that doesn’t require a down payment. Federal Housing Administration loans have a minimum down payment of 3.5%, and some conventional loan programs allow down payments as low as 3%.

How to avoid this mistake: Figuring out how much to save is a judgment call. A bigger down payment lets you get a smaller mortgage, giving you more affordable monthly house payments. The downside of taking the time to save more money is that home prices and mortgage rates have been rising, which means it could become more difficult to buy the home you want and you may miss out on building home equity as home values increase. The key is making sure your down payment helps you secure a payment you’re comfortable making each month.
Whether it's the roof, water heater or furnace, aging home systems will need replacement. And that may end up being sooner than you’d like, especially if you didn’t pay close attention to the age and condition of the roof, plumbing, electric and heating and cooling systems when your inspector pointed them out. HomeAdvisor’s 2015 New Homeowner Survey found that 75 percent of homeowners face an unexpected emergency within a year of purchase. To expect the unexpected, Hunter points to the survey’s recommendation that homeowners plan to spend 1 percent of the home’s purchase price on unplanned repairs. Maintaining at least that much in your emergency fund will help keep you from dipping into other savings from year to year.
Begin by house hunting online, whether your agent is sending you homes listed on the market through the local multiple listing service, or you're checking out consumer-facing marketing sites like Zillow, Trulia, realtor.com or Redfin. It’s easy to narrow your online searches by setting boundaries around the neighborhood or general part of the city you hope to buy in.
Once you have researched the home buying process in detail, the next phase is to take actionable steps towards your goal of becoming a homeowner. The home buying process is no doubt a long and arduous process, and it is possible that you will experience some setbacks along the way. At times like these, a helpful home buying process checklist will prove to be helpful:
As a buyer, you have the right to a professional home inspection before you purchase the house, and you would be crazy not to do it! This is one of the most important precautions you can take before purchasing a home because it keeps you from being blindsided by structural issues or expensive repairs. If the inspection reveals major problems with the home, you can ask the seller to fix the problem, reduce the price, or cancel the contract.
Minneapolis-St. Paul scores high for its flourishing job market and quality of life, but the area increases its appeal with a low cost of living. The Twin Cities have a median home value of $223,995, according to Zillow, which is slightly over the national average at $211,731. But residents still only pay 25.71 percent of the blended annual household income toward housing and utilities.
In addition to saving for a down payment, you’ll need to budget for the money required to close your mortgage, which can be significant. Closing costs generally run between 2% and 5% of your loan amount. You can shop around and compare prices for certain closing expenses, such as homeowners insurance, home inspections and title searches. You can also defray costs by asking the seller to pay for a portion of your closing costs or negotiating your real estate agent's commission. Calculate your expected closing costs to help you set your budget.
As you’re comparing quotes, ask whether any of the lenders would allow you to buy discount points, which means you’d prepay interest up front to secure a lower interest rate on your loan. How long you plan to stay in the home and whether you have money on-hand to purchase the points are two key factors in determining whether buying points makes sense. You can use this calculator to decide whether it makes sense to buy points.
Seek more than one estimate for expensive repairs, such as roof replacements. A good real estate agent should be able to give you referrals to contractors who can give you estimates. But you also should seek independent referrals from friends, family and co-workers so you can compare those estimates against ones you receive from contractors your agent refers.
First-time home-buyers are sometimes surprised when they see how closing costs can add up. The average amount is 3% to 6% of the price of the home. Given that range, it's a wise idea to start with 2%-2.5% of the total cost of the house, in savings, to account for closing costs. Thus our $300,000 first-time home buyer should sock away about $6,000-$7,500 to cover the back end of their buying experience. Tallying the recommended savings so far, the amount comes to $36,000-$37,500.
Ask your real estate agent for information on crime rates and the quality of schools around your prospective neighborhoods. Calculate your new commute times to see if they seem manageable. Visit the neighborhood at different times and days to check for traffic conditions, noise levels, and if people are comfortable being outdoors. Only choose a neighborhood that you and your family feel good about.
Buying a house across the street from a high school didn’t seem like such a bad idea when you saw how nicely renovated it was. But when you don’t have kids and Friday night football games are keeping you up later than you would like, you realize you should have made a pros-and-cons list regarding the location. Don’t let a charming interior override a location you dislike or a lot that will give you flooding problems. “If you don’t like your lot, don’t buy the house, because you cannot change that,” says Kim Wirtz, a Realtor for Century 21 Affiliated in Lockport, Illinois.
First-time home buyers tend to pay more than experienced buyers would pay for the same house, according to research conducted by two economists with the Federal Housing Finance Agency. In their analysis of appraisal data from more than 1.7 million home sales, FHFA economists Jessica Shui and Shriya Murthy concluded that first-timers overpay by an average of 0.79%, which was nearly $2,200 per house, according to the data set they examined.
Common contingency clauses include appraisal, financing and home inspection. For example, if the appraisal comes in lower than the sale price, the appraisal contingency allows the buyer to back out of the contract. The same goes for financing and home appraisal. In the event the buyer’s loan doesn’t go through or the inspection report shows significant problems, the buyer can get out of the contract without losing their earnest money.
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