Types of Mortgages
There are a HUGE number of options for choosing a loan... we could spend hours telling you about all the mortgage choices you've got. But we'll keep it simple. Here are four fairly common loans used by Seacoast home buyers.
Conventional Mortgage
This "traditional" loan is the most common, used by buyers with excellent credit and a down payment of at least 10%.
FHA Mortgage
The FHA loan is a government loan targeted to buyers with lower credit scores or without 10% down payments.
VA Loan
Specifically for active military and veterans, VA mortgages offer lower credit qualifiers and down payments as low as 0%.
Local Programs
Some lenders, cities, or states will offer specialized programs for certain buyers (first-time, low income, etc.) to help more buyers qualify for loans.
What Do Mortgages Include?
Your monthly mortgage payment won't just be the repayment of the money you initially borrowed to pay for your home. Actually, there are four main components to most mortgages, often abbreviated as "PITI".
Principal
This is the repayment of the initial amount you borrowed from your lender (in other words, the price of your home).
Interest
This is a payment to the lender for the money borrowed. It is calculated out for the duration of your loan and repaid monthly along with the loan.
Taxes
Your annual city and county taxes assessed on your property are divided by the number of mortgage payments you make in a year and added into your mortgage.
Insurance
Your monthly homeowner's insurance payment covers you against various hazards and is added to your mortgage payment.
Going Loan Shopping and Understanding Your Options
If you've learned nothing, it's that there are a LOT of moving parts when it comes to getting a mortgage. That's why it's especially important to work with a lender you trust to help you understand your options, ensure you find the loan that's right for you, and walk you through the whole process, start to finish. But... how to find the right lender?
Start with your banks
You probably already do business with a couple of banks or credit unions, so these are a great place to start. Pick up the phone and see what they've got to offer you as a valued client.
Get recommendations
Have family or friends who recently bought a home in your area? Ask who they used for a lender, then pick up the phone and start calling! Who knows; you could get a referral discount.
Look local
Intrigued by the local buyer programs offered in your area? Start calling local mortgage brokers or credit unions to see what programs they might be able to offer you that a larger bank can't.
Calculating Your Monthly Budget
Now that you know what loan options are available to you, what you can expect to pay as a down payment, and what your likely interest rates will be, it's time to determine how much you can afford to pay every month, which will then be used to calculate the price range of your home.
Keep in mind that your mortgage costs will be based both on the price of the home and the CURRENT interest rates. A home's affordability can vary from one day to the next based on the current rates.
Making an Offer
You found the perfect house, and now it's time for your and your agent to sit down and discuss your offer. It's important to work together to determine a price you can comfortably afford but will also be a realistic offer for the seller to accept and will not be dismissed against any competing offers the seller might receive.
What Will I Pay Upfront?
Earnest money
When you submit an offer, you'll likely include a small payment of "earnest money" to show the seller you're serious. If they refuse, you get this back. If they accept, it goes towards your closing costs.
Down Payment
Depending on what type of loan you'll be using, this number will vary greatly but is typically calculated as a percentage of the total cost of your home. It's definitely the heftiest upfront cost you'll pay.
Closing Costs
In addition to your down payment, you'll pay a number of other smaller charges, like home inspection and appraisal charges, loan origination fees, title fees, attorney fees, prorated taxes or insurance, and more.
Requesting a Home Inspection
If the seller accepts your offer, it's time for a home inspection. Before you close, you'll want to have an experienced professional walk the house to ensure that there aren't any lingering problems or maintenance issues that might not be visible at first glance. You don't want to be hit with a serious maintenance or structural issue right after you move in.
Should issues be uncovered, you have three options: Request the seller repair the problems, request credits or a price reduction so you can repair the issues yourself, or walk away from the sale.
Review Your Contract
Here's where you real estate attorney will come into play. Your attorney will review all the paperwork (there's a lot) associated with the sale to ensure that everything is in perfect order and there won't be any hangups.
Finalize Your Mortgage
At this time, you lender will likely be requesting a lot of paperwork from you to finalize your mortgage approval—things like employment verfication, bank and credit card statements, tax returns, W2s... and more.
Pay, Close, and Get Keys!
On closing day, you, your agent, and your lender will sit down to sign all the paperwork. You'll submit a (very large) check for the closings costs and once everything is signed, you'll get the keys to your very first home!
Still Have Questions About Buying Your First Home on the Seacoast?
We bet you do! Buying your first home is no simple process, and though we have tried to provide as many important details as possible, there's still much to ask and learn. So don't wait—contact us today and ask away! Want to do some more reading? We have plenty of resources to help you out. Learn more about buying a home today!