Spring into Homeownership: Essential Tips for Buyers
As spring arrives, many people begin considering buying or selling a home. Homeownership represents the American dream for many, and starting off on the right foot is essential. Here are some tips to help you get started!
Pre-Approval: Most realtors require a pre-approval letter from a mortgage lender before they will show you a home. This requirement serves a couple of reasons. Realtors only earn a commission at closing, so showing you a property that is out of your price range wastes both your time and theirs. Additionally, a pre-approval letter indicates that you have spoken with a loan officer and that the lender has all your pertinent information, which provides reassurance to the realtor.
Down Payment: A down payment is the percentage of the purchase price that you contribute to the loan. Different lenders and mortgage loan programs have varying down payment requirements. Putting money down shows that you are invested in the purchase and can also affect your interest rate.
Private Mortgage Insurance (PMI): PMI is an insurance policy that protects the bank in case you default on your loan. It is typically required when the borrower makes a down payment below a specific percentage of the purchase price. If you do end up with PMI, ask your lender about their policy for dropping it. However, in some mortgage programs, the only way to remove PMI is through refinancing.
Credit: Credit score requirements can differ from lender to lender. A common factor, however, is that higher credit scores generally result in lower interest rates. Securing a low interest rate can save you thousands over the life of your loan.
Escrows: Your mortgage payment will often include escrow for property taxes and insurance. The amount of taxes depends on the property’s location, and taxes can significantly impact your monthly payment. If you’re interested in a specific area that has high taxes, consider looking at nearby towns with lower tax rates. Insurance is also crucial for protecting your home from unexpected events.
Price Range: When thinking about purchasing a new home, focus on the monthly payment you can comfortably afford, including escrows, rather than just the purchase price. This focus will provide a better understanding of how much house you can afford. Once you have a target monthly payment, you can look for homes within that price range.
Rate Shopping: It is essential to shop around for the best mortgage rates. A lower interest rate means a lower payment and less interest paid over the life of the loan. Even a half-percent difference can lead to significant savings.
If you’re in the market for a new home, contact one of our mortgage loan officers to get started with your pre-approval today! If you’re looking to lower your monthly payment or shorten your loan term, call them to see if refinancing is the right choice for you. To ensure your credit and budget are ready for your new home, feel free to reach out to me today at Creynolds@newdimensionsfcu.com or (207) 872-2771.