Even if you don't know where to start, don't be daunted by the process! Buying a home for the first time may seem overwhelming, but we're here to guide you each step of the way. Learn more about obtaining a mortgage, finding the right home, and making an offer, and you'll be on your way to owning your very own home in The Triangle!
Understanding Mortgages
Let's talk about mortgages. Most buyers need one, and there are a lot of options that vary greatly from lender to lender and from buyer to buyer. It's important to understand what you're looking for and talk to various lenders to ensure you're getting the best deal and service possible.
Types of Mortgages
There are four basic types of mortgages used by the majority of home buyers.
Conventional Mortgage:
This is the standard loan used by buyers with good to excellent credit who make down payments of at least 5%. However, there are programs that offer options for lower down payments based on buyer credit and property location.
FHA Mortgage:
These loans often apply to buyers with lower credit scores, and they offer a down payment as low as 3.5% and lower interest rates. However, FHA mortgages do also require mortgage insurance premiums, which can result in higher overall costs.
VA Mortgage:
Veterans and active military members qualify for VA loans. These offer up to 100% financing, simplified loan approvals, and lower interest rates. They can be lower than conventional loans.
USDA Mortgage:
These loans are available to buyers in rural or low-density areas and offer up to 100% financing and below-market interest rates. Their ideal buyers are of average means, have lower credit scores, and are buying modest homes. Additionally, because of the government's loose definition of the term "rural," some buyers in the smaller communities surrounding The Triangle are eligible for this type of loan.
What Do Mortgage Payments Include?
There are four main components to a mortgage payment, 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 minus your down payment).
Interest:
This is a payment to the lender for the money borrowed.
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
Before you decide on any particular loan or lender, it's important to do your research. That means talking with at least two different lenders to ensure that you're getting the best rate and service possible. It's also important to understand two different types of interest rates offered by mortgage lenders.
Fixed-Rate Mortgage:
The interest on an FRM will not change, making the monthly payments very predictable.
Adjustable-Rate Mortgage:
The interest rate on an ARM will often be lower initially, but as interest rates do fluctuate with the market, they can be somewhat unpredictable or even result in higher payments.
Calculating Your Monthly Budget
Now that you know some of the loan options available, 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.
Finding a Real Estate Agent in The Triangle
You don't have to work with an agent - but it is highly recommended unless you are an extremely experienced buyer or lawyer. Your agent should be someone you can trust, an expert in real estate in your area and neighborhood, and very proficient in working with buyers of your experience level.
Shopping Homes for Sale in The Triangle
Now it's time for the fun part - you get to start shopping! This is where you decide what you want and need in a home, from the type of house, to the location of the neighborhood, to all the exciting interior and exterior amenities you just have to have! Make sure you keep records of the homes you visit, noting things you liked, didn't like, pros and cons, etc. Looking back through the listing pictures can also help keep your memory fresh.
Tip: Before you start touring homes, determine the actual selling price of homes in your preferred neighborhoods - not just their listing price - to get a better idea of the actual affordability of the location.
Making an Offer
You found the right 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?
Due Diligence Fee and Earnest Money:
Think of these as your security deposits. Both are paid when your offer is accepted. Due Diligence is paid to the seller, and Earnest Money is held in a trust account. They indicates your level of seriousness to the seller. When you close, these are both applied to your down payment or closing costs.
Down Payment:
This is determined by your loan, or possibly any government programs or assistance you have requested.
Closing Costs:
These represent the fees associated with paperwork and lender charges.
Requesting a Home Inspection
Once your offer is accepted, you'll want to have an experienced professional to inspect the the house to ensure that there aren't any problems 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. If necessary, you can request that the seller repair any issues you find.
Finalize Your Mortgage
Once your offer is accepted, work with your chosen lender to submit your mortgage application, have your home appraised, and review predicted closing costs. There are many costs commonly associated with closing, including attorney fees, title insurance, appraisal fees, home inspection fees, courier fees, government recording fees, and taxes.
Closing
If everything looks good, it's time to make your final payment, sign the paperwork with the closing attorney, and get your keys!
Still Have Questions About Buying Your First Home in The Triangle?
Buying your first home is no simple process, and though we have tried to provide many important details, there's still much to ask and learn. So don't wait - contact us today! Want to do some more reading? We have plenty of resources to help you out. Learn more about buying a home today!
