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Opening the door to the home buying process

Green illustrated houseThe decision to cross the threshold from dreaming about your first home to buying your first home is a big leap. The home buying adventure is thrilling, but it can also be intimidating and overwhelming. More people are waiting to buy a house. According to a recent Zillow survey, the average first-time home buyer is 33-years-old and single (60 percent). The decision to purchase your first home is a personal one and is as unique as the colors you plan on painting the walls. This isn’t just a house. It will be the home you build memories in, spend time with those you love and grow.

Be prepared for the home-buying process

Financial health

From getting your credit score in shape to trimming the fat from your budget, flex that financial muscle in preparation for this big investment. This is a marathon, not a sprint. A good rule of thumb is taking your current rent payment and multiplying it by 200 to estimate the total price of the house. Of course, this does not include all of the extras like property tax, insurance, utilities, etc. Many financial institutions have a feature or tool to categorize your spending through an online banking program. This is a good snapshot of where your money is going and enables you to set up a budget.

Pre-qualify

A lot of people find the home they want and then figure out how they are going to afford it. This is a recipe for disappointment. Pre-qualifying helps you to determine what kind of loan you might be eligible for and helps you to estimate your budget. Don’t get pre-qualification confused with pre-approval. Pre-qualifying is a ball park figure, pre-approval accompanies the mortgage application for the specific home you want.

Find a loan

As a first-time homebuyer there are many buyer programs available to you. Completion of programs like the Home Advantage program offers you the opportunity to put zero money down. Some programs require attending a class, but five hours of your time could save you thousands.

Find a home

This tends to be the most fun, so people like to start here. But it is important to know your price range in order to manage expectations. Before beginning your hunt, create a list of wants vs. needs and what falls into your budget. Yes, that room for your home brewing station would be awesome, but the need for a garage might outweigh it.

Your offer

Purchasing your first home is highly emotional. Don’t fall into the trap of becoming “house poor.” When it is a “sellers market” (low housing inventory), homes can tend to sell for more than fair market value. It can be very tempting to over bid on your house. Refer back to your wants vs. needs list, and remind yourself of your budget. Put them on a sticky note on the fridge, your car visor, the bathroom mirror, or wherever you can think of to remind yourself of your goals.

Closing

The day is nearing to sign that mortgage application, put down the down payment and grab those keys. Almost. Don’t be surprised by the closing costs; 3-6 percent of your home’s value will accompany your investment. Closing costs include an Earnest Money deposit (usually 1% of purchase price), a home inspection ($300-500), and appraisal ($500-600). Before you officially close, you enter escrow. An escrow is like getting engaged. You plan for the wedding (closing the house) hoping that all goes well, but you prepare for the unexpected. A successful closing means you finally get those keys and get to perfect your signature by signing a mountain of loan documents.

Numerica has a team of lending experts that can help you along your path to homeownership.

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