Buying A Home
Contact us to begin the process of buying a home today!
Before getting a mortgage or any kind of loan, you should always check your credit. According to the law, you are allowed to receive one free copy of your credit report per year. You can do this by visiting annualcreditreport.com. Scores range from approximately 300 to 850; generally, the higher your score, the better loan you'll qualify for. Don't forget to check your report for errors. If there are any, dispute them. It may help your credit score. You can also check your credit score for free at www.creditkarma.com.
You can calculate how much you can afford by starting online. There are several online mortgage calculators that will help you calculate an affordable monthly mortgage payment. Don't forget to factor in money you will need for a down payment, closing costs, fees (such as fees for an attorney, appraisal, inspection, etc.) and the costs of remodeling or furniture. Remember that you do not always have to put down 20% as was necessary in the past. There are loans available with little to no down payment. An experienced home loan expert can help you understand all your loan options, closing costs and other fees.
To find the right mortgage lender it’s best to shop around. Get recommendations from your friends and family and check with the Better Business Bureau. Talk to at least three mortgage lenders, ask a lot of questions, and make sure they have answers that satisfy you. Be sure to find someone that you are comfortable with and who makes you feel at ease.
Once you have the right mortgage lender, make sure you get a pre-approval. Qualifications are only a guess based on what you tell the lender and are no guarantee, whereas a pre-approval will give you a better idea of how big a loan you qualify for. The lender will pull your credit and get more information about you. However, you could take it one step further by getting an approval before you start home shopping. That way, when you're ready to make an offer, it will make the sale go much quicker. In addition, your offer will look more appealing than other buyers since your financing is guaranteed.
There are many different types of mortgage programs out there, but as a first-time home buyer, you should be aware of the three basics: adjustable rate, fixed rate and interest-only.
Adjustable Rate Mortgages (ARMs) are short-term mortgages that offer an interest rate that is fixed for a short period of time, usually between one to seven years. After that, the interest rate can adjust every year up or down, depending on the market. These are good for people who don't plan on living in their home very long and/or are looking for a lower interest rate and payment.
Fixed-rate mortgages are more traditional and offer a fixed interest rate (and thus a fixed monthly payment) for a longer period of time, usually 15 or 30 years, though they're available in 20 or 25 year terms. These are good for people who like a predictable payment and plan on living in their home for a long time.
Both Fixed and Adjustable Rate Mortgages can have an interest-only payment. This means that for a certain amount of time during the loan term, you're allowed to pay only enough to cover the interest portion of your payment. You can still pay principal when you wish, but don't have to if your budget is tight. There is a myth that with interest-only mortgages, you don't build equity. This is not necessarily true, since you can build equity through home appreciation. The benefit to interest-only mortgages is that you increase your cash flow by not paying principal.
Remember to ask your mortgage lender or mortgage banker many questions about which mortgage is right for you and your situation.
Make a list of the things you will need to have in the house. Ask yourself how many bedrooms and bathrooms you will need and get an idea of how much space you desire. How big do you want the kitchen to be? Do you need lots of closets and cabinet space? Do you need a big yard for your kids and/or pets to play in?
Once you've made a list of your must-haves, don't forget to think about the kind of neighborhood you want, types of schools in the area, the length of your commute to and from work, and the convenience of local amenities. Take into account your safety concerns as well as how good the rate of home appreciation is in the area.
Now that you've found the home you want, it’s time to make an offer. Most sellers price their homes a bit high, expecting that there will be some haggling involved. Have an honest conversation with your realtor on how much you feel comfortable offering for the home, and try to avoid getting caught up in a bidding competition with other buyers. Your realtor can also provide you with a list of what comparable properties have sold for in the vicinity. Once you've made your offer, the seller may make a counter-offer, to which you can also counter-offer. Once both the seller and buyer have agreed on a price, you'll make an earnest money deposit, which is money that goes in escrow to give the seller a sign of good faith about your intentions to buy the home.
A home inspection is an integral part of the home buying process that will provide you with a ton of information. The cost of buyer home inspections in the Twin Cities typically ranges from $400 to $1,000, depending on the number of services desired. It is well-worth the money spent because it ensures the property's structural soundness and good condition.There are several very experienced home inspectors in the Twin Cities area that will tour the home, inspect the structure, mechanicals, and appliances, among other things. At the end of the inspection, they will provide you with a summary of their findings. Discuss with your realtor the items of concern that were found during the inspection (there are many beautiful homes, but none are perfect!). At this point, it is important to have a realtor with excellent negotiating skills, because they will be working in your favor to get you the best deal on the home.
Setting a closing date that is convenient to both parties may be tricky, but can certainly be done. Remember that you may have to wait until your rental agreement runs out, and the seller may have to wait until they close on their new house.
Be sure you talk to your mortgage banker to understand all the costs that will be involved with the closing so there are no surprises. Closing costs will likely include (but are not limited to) your down payment, title fees, appraisal fees, attorney fees, inspection fees, and points you may have bought to buy down your interest rate.
You have your mortgage, closed the deal, and now it's time to move in! Start unpacking and enjoying your home! Buying a home for the first time doesn't have to be a hassle if you're prepared and you know what to do and when to do it. Choose an experienced home loan lender and a friendly, knowledgeable real estate agent--they are the key to helping you have a smooth home buying experience!
At The HIVE, we believe that one of the greatest ways to generate wealth is to become a homeowner, and it's our goal to make homeownership accessible to all. Through our donor-advised fund at The Saint Paul & Minnesota Foundation, we are able to work with our clients to grant donations to local non profits that work to build an equitable Twin Cities community for all.
We have partnered with The Sanneh Foundation and Habitat for Humanity; however, we love to learn about non profits that are near and dear to our clients' hearts. Each time we help someone buy or sell a house, a donation is made in their honor to a non profit of their choice.
Contact us to learn more about our work in the community and how you can get involved.