For most people, the single most expensive item they will ever purchase will be a home. Below are some financing tips to consider when you are ready to start the home buying process, and more information on this subject can be found in the Buying Strategies section.
- Get pre-approved: At Beyond Homes we will highly recommend you get pre-approved for a loan and obtain a letter stating the amount you are pre-approved for. Knowing this up front will help you focus on what you can afford; and when presented with a purchase contract the seller will take the offer more seriously.
- Determine the source of your down payment: After talking with a loan consultant you will know the approximate amount that your down payment will be. At that time you should begin thinking about where the money will come from. Will any come from family or friends? If so your lender will need to know. If you need to liquidate stocks, find out how long it will take you to do so. If you plan to borrow from your 401K, check with your employer to see how this is done, and how much notice they need. All of these things will ensure a strong offer and a simple escrow.
- Know all the costs involved: Along with the down payment there are other costs a buyer might incur. These include title insurance, taxes, inspections, and many other things that will be stated in the purchase contract. Your agent or lender will ensure that you have an estimate of these costs by providing you an Estimated Buyers Cost Sheet. This spreadsheet will give a detailed estimate of all known costs you will incur. Having this upfront minimizes any unpleasant surprises during the escrow process
- Don't forget about property taxes and home insurance: When you are figuring out your monthly payments for principal and interest on the price of a home (use our Mortgage Calculator to determine this amount), don't forget to add in property taxes, and homeowners insurance on top for a total PITI (Principal Interest Tax and Insurance). As an estimate, multiply the purchase price of the home times 0.008 (this would be a Mill Levy of 100) to get an annual tax amount. Thus, if you bought a $300,000 home, you would owe $2,400 the first year or $200.00 a month. As for insurance, you can estimate $2.00 per $1,000 of the purchase price. Thus, to insure the same $300,000 home it would cost about $600 a year or approximately $50 a month.