Home Buyer's Guide
Buying a home is a major financial commitment. Before you begin house hunting or reviewing mortgage rates, you should assess your current financial situation and how it might change in the future.
Intelliloan® recommends that, in general, you should only plan to buy a home if you plan to live in it for at least five years. However, this can depend on factors such as the housing market, rental costs, and your amount of home equity.
The down payment is the cash amount you will pay for your home at closing. An FHA loan requires a down payment of at least 3.5%, but conventional loans would typically require at least 5%. First-time home buyers could sometimes qualify for a 3% down payment on a conventional loan. The more is your down payment, the lower are your monthly mortgage payment and interest rate.
In addition to the down payment, you will have to pay the closing costs, which are the costs associated with processing and securing the loan. Closing costs vary according to the type of mortgage and the price of the house. They generally range from 2% to 5% of the purchase price of the your home.
Evaluating Your Mortgage Options
Mortgage has three components: a loan type, a rate type, and a term. You should know how these elements work together in order to determine the mortgage for your requirements.
- An FHA loan requires a relatively low credit score and a low down payment.
- A conventional loan is slightly harder to qualify for, but over time it can cost less than an FHA loan.
- A VA loan is meant exclusively for active military members, veterans, and eligible surviving spouses.
- A jumbo loan is a mortgage that exceeds the limit of the conventional loan. In other words, if the amount of your loan is between $453,100 and $3 million, you will need a jumbo loan.
Two types of mortgage rates are available through Intelliloan: fixed rate and adjustable rate.
- A fixed rate will stay constant for the loan term, and will keep the monthly mortgage payment unchanged.
- An adjustable rate will stay constant for the first 5, 7, or 10 years. Thereafter, it will adjust according to the market conditions.
The term refers to the length of the loan. A typical fixed-rate mortgage will have a 15 or 30-year term. An adjustable rate mortgage typically has a 30-year term.
Work with a Real Estate Agent
When you work with a real estate agent, it can make your home buying process more effective. An agent can help you:
- Choose the right house
- Manage the purchase agreement and other paperwork
- Connect with inspectors, movers, insurers, repair professionals
If you are buying a home, you don't have to pay anything to the real estate agent. They are typically paid commission by the seller when you buy a home.
Identifying the Right Home to Buy
- Search online
- Seek suggestions from your real estate agent
- Explore the neighborhood
- Consider the commute
- Review the local schools
Make an Offer
You should make an offer after considering your budget and financial plan, and after reviewing the recent sale prices in the neighborhood for similar types of homes. If you want, you can even make an offer for an amount higher than what you have been preapproved for from your lender. But you may have to make a bigger down payment to compensate for the difference.
Getting Ready to Close
Once your offer is accepted, you can close the loan in three stages:
- The home inspection
- The appraisal
To ensure that your loan closes, try to avoid making any significant financial changes or expenditures. Do not make purchases that could deplete your assets, and do not apply for new loans or credit lines. You can pursue these after the loan closes.
Closing on Your Home
- Acknowledge your closing disclosure (the document you will receive before closing, which summarizes the final costs of the loan)
- Attend a final walk-through inspection of the property
Managing Monthly Mortgage Payments
Every month, you will make a monthly payment to your lender. This amount will be used to pay back the principal amount you borrowed, plus interest. Your mortgage statements will present the break-up of the payment.
Speak to an Intelliloan® Home Loan Specialist
Call us at 833-984-2471 to understand your most competitive and appropriate home loan options. Or, submit this form online, and we will reach out to you. We hope your day is going well.