Purchasing a home is most likely the biggest investment most people will make in their lives. The process of finding, buying, and paying for a home can be overwhelming for first time homebuyers to navigate. It’s difficult to know where to start – what does a mortgage entail? What are your options? What preliminary steps are needed for this process?
We’ve put together an infographic that acts as a “Mortgage 101” for first time homebuyers. It addresses some of the common questions and concerns you may have when beginning house hunting, or if you’ve already found a home you love and want to make an official offer.
Before you begin, you’ll need to make sure you’re ready to buy a home, financially and otherwise. A big part of wisely choosing a home is knowing your budget. How much can you afford in monthly mortgage costs? Do you plan to stay in this home for a long time, or are you expecting to move in a few years? These are good questions to ask yourself (and a real estate agent or mortgage broker) when thinking about how you’ll finance your new home. It’s also essential to have decent credit if you want to be approved for a home loan, so continue paying your bills on time in the full amounts if possible. Furthermore, you’ll need to have enough to put down an initial down payment (this cost is typically between 5 and 20% of the sale price; if less than 20%, you need to pay mortgage insurance).
If you need help scouting out the perfect home for you, it’s recommended that you use a reliable realtor. In fact, this is what most home buyers do! As you can see in our mortgage infographic, 88% of buyers purchase their home through a real estate agent or broker. That’s a vast majority you can trust!
Perhaps one of the most perplexing pieces of obtaining a home loan is choosing between all the mortgage types. Different loans have different benefits for everyone depending on your circumstances, so you may want to consult with your mortgage lender over what loan type would be the best fit for you based on your income, credit, home price, and whether or not you’ve served in the military. There are also some key differences between fixed rate loans and adjustable rate loans, which we have outlined in the chart as well.
Buying your first home can be a stressful or intimidating experience, but it doesn’t have to be! By doing your research and breaking things down into smaller, more manageable steps, you’ll be able to worry less about the process and focus on enjoying a new home!