Part 1: Understanding Your Mortgage
One of the biggest areas of concern for many buyers is the mortgage. What options are out there? How do you apply for a mortgage? What about bad credit or no down payment? Don't panic—we've got answers!
Types of Mortgages
There are a LOT of different mortgage options out there. Some are quite common, others very rare. The type of mortgage that works best for you will depend on your unique situation—your finances, the type of home you're buying, your marital status, and more. Here are a few of the more common mortgage types used by first-time buyers.
Conventional
This is the most common mortgage, best-suited for buyers with good to excellent credit who are able to make down payments of at least 10%. Most buyers will use this loan.
VA Loan
The VA Loan is available to most active or veteran members of the armed services. VA loans offer up to 100% financing and simplified loan approvals. It may also be used in conjunction with other loan options.
Government Loans
Depending on your finances and where you'll be buying a home, you may qualify for a subsidized government loan program, such as the FHA or USDA Loan. These allow buyers with lower credit or low down payments to buy homes.
What Do Mortgages Include?
Your mortgage isn't just a payback of the money you borrow to purchase your home. There are few more payments bundled into your monthly mortgage. Here's a quick look.
Principal
This is the repayment of that initial amount you borrowed from your lender. (In short, the price of your home, less the down payment.)
Interest
This is a payment to the lender for money borrowed. It's calculated as a percentage of the total amount borrowed.
Taxes
The annual city and county taxes assessed on your property are typically bundled into your mortgage payments (and paid to the town or city by the lender).
Insurance
Like taxes, homeowners insurance is often bundled into your mortgage payments. You pay the lender, they pay your insurance company, and you're protected against various hazards.
Going Loan Shopping & Getting Prequalified
All right, now you understand the types of mortgages and the components of a mortgage... it's time to actually find out what you qualify for. And the only way to do this is to start talking to lenders. The easiest way to do this is to do this is to pick up the phone and start calling! Here's what that process might look like for you.
Ask for referrals
How do you find a good lender? The best way is to ask around. Check with friends, family, or coworkers, and definitely ask your Realtor for recommendations.
Start calling
Once you've got a few names, it's time to pick up the phone and start calling! Lenders will likely want to discuss your goals, your income and savings, and where you'll be buying.
Hear some options
Based on information given, the lenders you speak to will likely give you a few loan options, what they'll entail, and how much you might be looking to spend based on various home prices and down payments.
Get prequalified
To give you a better idea of what you'll actually qualify for, most lenders will want to gather some paperwork from you—and present you with an official pre-qualification letter.
Part 2: Shopping Homes for Sale in the Triangle and Wayne County
All right; you're prequalified for a mortgage! Now it's time for the fun part—home shopping! But before you race out to start touring homes, here are a few things to keep in mind.
Separate wants & needs
Most likely, you're not going to get EVERYTHING you want in a home. It's important to know the difference between what you absolutely NEED in a home and what you WANT. You may have to forgo a WANT or two to ensure all your NEEDS are met.
Be a little choosy
Your first few home tours can be pretty exciting, but trust us, it can start to become a little tiring if you're not careful. Avoid getting burned out by making sure a home checks off ALL your NEEDS and at least several of your WANTS before you request a tour.
Inspect homes closely
Don't get caught up with fancy updates or fresh paint—make sure to take a careful look at the bones and details of every home you visit. Take pictures and notes. And always ask your Realtor their opinion of the home.
Part 3: Making an Offer
You found a home you love... now it's time for you and your agent to sit down and discuss your offer. It's important to find a price that you can comfortably afford but will also be a realistic offer for the seller.
Offer, Negotiate & Sign
Once you decide on an offer price for the home, it's time to present your offer to the seller. Here's what to expect.
The Purchase & Sale
The Purchase and Sale Agreement is your official offer. It will include details like the offered price, closing date, and any requested contingencies, such as a home inspection and appraisal.
Negotiations
The seller now has three choices: they may accept your offer as it is, they may reject it, or they may present a counteroffer with adjusted terms. You may accept or alter this counter offer.
The inspection
Once you and the seller reach common ground, it's time for the home inspection. If the inspection reveals any major issues, you may request repairs or credits, or back out of the sale entirely.
Part 4: Closing the Sale
You and the seller have agreed on a price, terms, and repairs or credits... so it's time to finalize your mortgage, pay your closing costs, sign some paperwork, and get your keys (finally)!
The Final Steps
All right... time for some grunt work. This part of the process is often the most tedious, but you'll get through it. The more prepared you can be with financial, personal, and account information the smoother the process will go.
Finalize your loan
Be prepared to submit a LOT of paperwork to your lender. During this time, your lender may have the home appraised and will present you with a breakdown of your final closing costs.
Sign & pay
On a predetermined day, you and the seller will sit down to sign, sign, and sign some more. You'll also pay your closing costs at this time—so be prepared with a big check for your down payment!
Get those keys!
At last! Congrats... you're (finally) a homeowner!
Ready to Buy Your First Home in the Triangle or Wayne County?
It all begins with finding the right Realtor. Want to know more about how we can help you become a successful first time home buyer? Check out our real estate resources, or just give us a call and we'd be happy to chat with you directly.