Usually, a first-time homebuyer will either pick a house they like or start looking for a home before lining up financing. At ChoiceOne Bank we recommend doing the opposite. First, sit down and do some hard thinking about what you can afford and what you want. Then talk to one of our loan officers when you are ready to start the process for your first home mortgage, and then start the steps to find your dream home.
It’s important to understand what you can afford based on your budget. Before diving into the housing market, ask yourself these questions.
What can you afford?
It may be hard to figure out what you can afford in a mortgage payment each month. Generally, the best ratio to have is one-fourth of your income going toward house payments.
Lenders calculate this using gross income anything between 25 percent and 32 percent is safe. Anything over 35 percent of gross income is getting into potential problems because it is risky if anything changes in your income such as an increase in insurance costs or job loss will make it difficult to make your mortgage payments.
How long for a loan term?
A 30-year fixed mortgage is preferable for first time homebuyers. At ChoiceOne Bank we can determine different payments with different rates and term as well as other options for your budget. Once you have that information, you will know your housing price range.
What are the final closing costs?
As a first-time buyer, it can be difficult to pin down your total tab for closing the purchase of your home. It’s is important when making your first home mortgage to have a thorough conversation about down payment costs and closing costs. You need to know the total out-of-pocket costs for your first home mortgage. Make sure you compare costs and fees when shopping. The lowest rate doesn’t always mean the lowest costs.
What do you want near your new home?
The way you live is key. Take stock of what you like to do when you get home. That can help you determine whether proximity to a gym, park or good restaurants matters.
Consider your transportation route and mode of transport you will use, and how you will get from home to other places. Walking three blocks to a bus stop when it’s 10 degrees can be bone-chilling. If you drive, try it before you buy.
Check out potential neighborhoods at different times of day. Before you sign for your first home mortgage, walk the neighborhood. While you have to make a purchase decision based on your current financial situation, you will want to imagine your future from a personal and professional perspective, too.
When you have a home, a lot of your money and time will be spent dealing with your home. Make sure you understand what’s involved. At ChoiceOne Bank we can help you with the big picture and walk you through each step to your first home mortgage.