Buying a house is a big accomplishment. If it’s you’re first time buying a home, you might have a lot of questions. Before you start house hunting, there are some things you should know so you can make your home buying experience go smoothly.
Understand Your Finances
The most important step before buying a house is to make sure you are financially ready. You should consider getting a free credit review with a Diamond representative. They will either tell you that your score is great, or they will provide you with suggestions to help improve your score.
Your credit score plays a role in determining your interest rate and whether you’ll be approved. If your score is too low, your loan application could be denied, or you could end up with a higher interest rate. When you have a higher interest rate, that can decrease the amount you are approved for.
Once your credit is in a good place, you can get pre-qualified. When you get pre-qualified with Diamond’s mortgage experts, they will help you gain a better understanding of how to improve your home buying experience. They will factor things like your income, and outstanding debts, as well as how much you currently have saved to show you the maximum loan amount you would be approved for.
Getting pre-qualified helps give you an estimate of how much money you need to cover the down payment and closing costs, which will vary depending on where the house is and your mortgage rate.
Building a Team
As you’re ready to move onto house hunting, it’s important that you meet with a realtor that you like. They’re the ones that are going to be with you through all the steps of buying a house. You need someone responsive and someone that listens to what you want and need. Diamond’s mortgage experts can recommend a realtor that they have worked with and trust to help you.
Your realtor is going to work directly with Diamond’s mortgage experts to construct offer letters. It’s important that both the lender and realtor can communicate effectively together because time is of the essence when submitting offers.
Something else to keep in mind is that your realtor won’t typically charge you directly. In most real estate transactions, the seller pays for the realtor’s commissions. Your agent’s broker may have a small fee that they’ll pass on to you, usually no more than a few hundred dollars, otherwise your agent’s costs should be covered by the seller.
Money You Will Need Upfront
One thing that can be confusing is understanding what costs you can’t include in your mortgage. Here’s what you need to know when it comes to how much money you will need when buying a house.
As a first-time homebuyer, your down payment could be as low as 3% of the sale price. This payment must be paid at closing with funds you have in your bank account that is not sourced from a loan. In addition to your down payment, your closing costs will also need to be paid at closing and cannot be sourced from a loan or rolled into your mortgage. Your closing costs can sometimes amount to more than your down payment, especially if you’re putting the minimum amount down.
Closing costs will include any fees such as: the appraisal fee, inspection fee, broker fee, underwriting fee and more depending on who you get your mortgage through. It will also include any taxes due and the first year of homeowner’s insurance. Your realtor and lender can help give you an idea of how much you should have saved to cover the down payment and closing costs.
The Appraisal and Inspection Process
After your offer is approved, it will be appraised by an appraiser chosen by your lender. If the appraiser values the home at less than what you offered, you will be responsible for paying the difference. That amount can’t be part of your mortgage. For example, if you offer $200,000, but your home is appraised for $190,000, you will have to pay that $10,000 at closing.
An appraisal is required and will cost between $415 and $450 through Diamond Credit Union as of 2023. The exact cost will vary depending on the house.
At this point home inspections will also take place. An inspector will look over everything in the house and let you know of anything that is broken, and anything that needs immediate attention. Diamond doesn’t require home inspections, but it could be worth it just in case the house has something majorly wrong with it. An inspection can cost anywhere between $300 and $500.
Plan for the Unexpected When Buying a House
Even though spending an additional $500 on the inspection seems like a lot, it could save you even more. If the home inspector does find something wrong, you can submit an offer to have the seller cover all or part of the cost to fix the issue. They might counter your offer and meet you half way, or decide not to cover it at all. Either way, at least you know that something is wrong with the house. If it ends up being a hefty repair that you can’t afford, you can back out of the sale.
“I found out my roof needed to be replaced after the inspection,” a recent first-time homebuyer, Anthony Hoey said. “I wasn’t expecting to have to pay an additional $2,500. You should be prepared for things like this to happen. Anything can break, even at inconvenient times. Luckily, I was able to negotiate with the seller and they ended up covering half of the bill.”
Reach Out to Diamond for Help
As a first-time homebuyer, it can feel like there is a lot of information coming at you at once. You can always reach out to a Diamond mortgage expert for advice. The Diamond team wants to make your home buying experience as easy as possible. You can contact the Mortgage Team for help, or check out Diamond’s mortgage blogs for more information.
