Diving into homeownership can be daunting! Real estate terms, financing requirements, attorney emails, and inspection reports can be dizzying! Let's dig into 3 of the most common homebuyer questions I receive to make the process feel a little more manageable:
1. How much house can I afford?: The first step in any home-buying transaction should be a conversation with a loan officer. You will provide them with some financial documentation and they'll analyze your debt-to-income ratio, employment history, income, etc. to determine what you qualify for. Once you have a pre-approval, your real estate agent can tailor your home search so you're *only* viewing homes in your budget. There's nothing worse than falling in love with a house you can't afford!
One helpful thing to keep in mind is, that homeownership might be more affordable than you think! For example, contrary to popular belief, you don’t need a 20% down payment to qualify. Talk to a real estate agent and understand your options so you can get in the game and start gaining equity.
2. What determines my mortgage payment? For most people, there are four components to a mortgage payment:
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Principal: The principal is the money that you originally agreed to pay back.
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Interest: The principal is the money that you originally agreed to pay back.
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Taxes: In some instances, your real estate taxes might be rolled into your monthly mortgage payment in an escrow account.
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Insurance: Homeowner’s insurance is required protection you must maintain to protect against home damage. Mortgage insurance (PMI) protects your lender and whether or not it is required is determined by your down payment.
3. What are the current interest rates and how do they impact me? Interest rates change daily! Your rate will depend on your credit history and your loan type. If you want an idea of current rates, or to see how rates will impact your payment, it’s best to talk specifics with your loan officer and real estate agent.
