Home buying can be an overwhelming experience with so many details to consider. It’s easy to lose sight of what’s important and break your carefully planned budget before you know it.
We’ve put together a list of Home Buying Terms to help you along the way. Follow these steps to know what to look for, do your research, and walk away if you aren’t getting your money’s worth.
The Right Price
Let’s talk budget. NerdWallet recommends to only spend 30% of your monthly income on housing expenses. If you’re renting, calculating your housing expenses is usually quite simple: Rent + Utilities = Housing Expenses
But as a new homeowner, your equation will look more like this: Mortgage Payment + Unexpected Repairs + Utilities + Private Mortgage Insurance + Property Taxes + Homeowners Insurance + Lawn Maintenance = Housing Expenses
Even without crunching the numbers, it’s clear that the sweet freedom of homeownership comes with a lot of responsibility and extra expenses. Make sure you’re aware of the small costs of home buying that can add up and set your budget accordingly. If you base your budget choices on your estimated mortgage payment alone, you’ll almost certainly go over budget in the end.
The Right Location
Say it three times, but don’t forget—the location means more than just a good neighborhood or a short commute. Your home’s location will affect its resale value in a variety of ways. For instance, even if you don’t have children yourself, buying a home in a good school district will make your life easier when it’s time to sell.
Taking walks around the neighborhood at different times of day is a great way to get to know the area. How quiet is it? Do neighbors keep their homes in good repair? Chat with a few residents to hear about experiences living there. Are mosquitos a big problem in the summer? How is the Homeowners Association, (HOA), if there is one?
The Right Size
No one can predict the future, but thinking ahead about your needs might help you avoid outgrowing your home in a few years. If you work from home you may need a separate office space for additional privacy. or want the kids to have a play room. If your family might expand, how many bedrooms will you need if you plan to stay in this house for the next several years.
It’s a common problem for young homebuyers to underestimate how much space their family will need. Even if you don’t need that space in the next year, it may be easier to adjust your home to fit your changing needs.
The Right Age
There are advantages to being the first owner of your new home, but there are also advantages to buying a resale home. Resale homes are often more reasonably priced than new homes. They also have the “lived-in“ factor. If your second-hand home needs some work, this can be to your advantage, too. You can negotiate the sales price based on the renovations needed and then do some of the work yourself. You can also have it done in the style, colors and quality you prefer.
If you decide to buy a resale home, make sure you are not inheriting things like dry rot, structural issues and maintenance that has been delayed. Schedule a home inspection with a professional to ensure you can handle to repairs and maintenance. Repairs and improvements can get expensive, but if you get the home for a reasonable price, chances are that you will be able to sell for a profit. Just make sure that your budget is prepared to handle the expenses along the way.
The Right Lender
While it’s not as exciting as house shopping, lender shopping can make a big difference in your budget. If you sign with the first lender you talk to, you may be spending more on high rates and lender fees than you should. According to Freddie Mac’s research, getting a second quote could save you as much as $1,500 over the life of your loan (or $3,000 if you get five quotes).
Here’s a checklist to help you avoid getting stuck with an expensive lender:
Lender Shopping Checklist
- Apply and get a pre-approval letter from a lender to get an idea of what you can afford. Tulsa Federal CU doesn’t require an address before you can start the process, but some lenders do.
- Shop for houses that you like and get a feel for what kind of home your money can buy.
- Get quotes from around three mortgage lenders that you might want to work with on the same day if possible. The rate may change but this would give you an idea of what they charge in the same market.
- Look closely at the Loan Estimate Forms you receive from your lenders. Compare the costs of each one as well as the interest rates. This is not a guarantee for that rate but gives you a starter plan.
- Look into the service backgrounds of your lenders. Are any of them in trouble with the BBB or do they have overwhelmingly negative reviews online?
- Once you’ve found your dream home and your offer’s been accepted by the seller- you’re ready to begin the actual mortgage application process. If you’ve done your homework well, things should proceed smoothly without any surprises at this point.
- Don’t rest easy just yet! Be sure to read the fine print on any documents you need to sign. If you find any errors, or something you don’t understand, point it out to your broker/lender.
- If everything seems to be in order, you’re ready to go ahead with the closing. Here’s wishing you years of happiness in your new home!
This article is for educational purposes only. Tulsa FCU makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.