Why should I buy instead of rent?
A home is an investment. When you rent, you write your monthly check, and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. This will save you a lot each year because the interest you pay will make up most of your monthly payment for most of the years of your mortgage. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you’ll enjoy having something that’s all yours – a home where your personal style will tell the world who you are.
How much of a down payment do I need?
There are mortgage options now available that only require a down payment of as little as 3% of the purchase price, however, the larger the down payment, the less you have to borrow, and the more equity you will have. Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan, which will add to the cost of the mortgage. When considering the size of your down payment, consider that you will also need money for closing costs, moving expenses, and – possibly -repairs and decorating.
Should I use a real estate broker?
Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you’ll want to know about a neighborhood you may be considering, including the quality of schools, the number of children in the area, the safety of the community, traffic volume, and more. He or she will help you figure the price range you can afford and search the classified ads and multiple listing services for homes you’ll want to see. With immediate access to homes as soon as they’re put on the market, the broker can save you hours of wasted driving-around time. When it’s time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and are there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don’t have to pay the broker anything! The payment comes from the home seller – not from the buyer.
How much money will I have to come up with to buy a home?
Well, that depends on several factors, including the cost of the house and the type of mortgage you choose. In general, you need to come up with enough money to cover three costs:
- Earnest money – the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house
- Down payment, a percentage of the cost of the home that you must pay when you go to settlement
- Closing costs, the costs associated with processing the paperwork to buy a house.
When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you.
How do I know if I can get a loan?
Use our simple mortgage calculators to determine your monthly payments. We recommend speaking to a mortgage lender and getting pre-qualified for a loan before you begin looking for a home. A pre-qualification lets you know exactly how much you can afford to spend, and once you do find the home of your dreams, having a pre-qualification will speed up the homebuying process. Speak to one of Biddeford Savings’ mortgage professionals to obtain a free pre-qualification.
In addition to the mortgage payment, what other costs do I need to consider?
Monthly utilities are a common cost that is not included in your monthly payment. If your utilities have been covered in your rent, this may be new for you. Your real estate broker will be able to help you get information from the seller on how much utilities normally cost. In addition, you might have homeowner association or condo association dues. Property taxes can also be substantial but may also be rolled into your mortgage payment. Again, your broker will be able to help you anticipate these costs.
How do I know if I’m ready to buy a home?
Do you have a steady source of income? Have you been employed on a regular basis for the last 2-3 years? Do you have a good record of paying your bills? Do you have few outstanding long term debts? Do you have money saved for a down payment? If your answer is yes to these questions, you may be ready to buy your own home.
What should I look for when walking through a home?
Is there enough room for both the present and the future? Are there enough bedrooms and bathrooms? Is the house structurally sound? Do the mechanical systems and appliances work? Is the yard big enough? Do you like the floor plan? Will your furniture fit in the space? Does anything need to be repaired or replaced? Imagine the house in good weather and bad, will you be happy with it year-round? Your real estate agent can point out the pros and cons and potential pitfalls of each home from a professional standpoint.
How many homes should I consider before choosing one?
There is no set number of houses you should see before you decide. Visit as many as it takes to find the one you want. On average, homebuyers will review 15 homes before choosing one. Just be sure to communicate often with your real estate agent about your housing wants and needs. It will help avoid wasting your time.
What is earnest money? How much should I set aside?
Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to show good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.
Are there any costs or fees associated with the loan origination process?
Yes. You may be required to pay an underwriting fee as well as appraisal, credit report, and closing fees. Biddeford Savings offers low-cost options for first-time homebuyers.
What is mortgage insurance?
Mortgage insurance is a policy that protects lenders against some or most of the losses that result from defaults on home mortgages. It is required primarily for borrowers making a down payment of less than 20%.
What are discount points?
Discount points allow you to lower your interest rate. They are essentially prepaid interest, with each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/8 (or.125) of a percentage point. When shopping for a loan, ask lenders for an interest rate with 0 points and then see how much the rate decreases with each point paid. Discount points are smart if you plan to stay in a home for several years since they can lower the monthly loan payment. Points are tax-deductible when you purchase a home, and you may be able to negotiate for the seller to pay for some of them.