Buying your first home is an exciting time! As you plan for purchasing a home, be sure to evaluate your financial needs early in the process. This will ensure the process is as simple as possible and help prevent any financing dilemmas from occurring after you have already found the home of your dreams. It’s also important to consider and recognize the new financial responsibilities of owning the home. And finally, be sure to understand what it means to borrow money in order to buy your home (aka a mortgage).
A mortgage is a loan for the purpose of buying a home. It is referred to as a ‘secured loan,’ meaning that you have to put up collateral in exchange for the loan. For mortgages, the home you are buying is the collateral. You pay the mortgage, which is based on a number of personal factors such as your income-to-debt ratio and your credit score.
As a potential homeowner, you may have a great deal of questions about the process of financing a home. Essex Homes has paired with Ameris Bank to help walk you through the process of qualifying for your first home. Ameris Bank is a service provider for Essex Homes because they are dedicated to keeping the process of buying a home as simple as possible. As a first-time home buyer, they understand that exceptional customer service provided by well-trained employees is a key necessity. Below are some of the most commonly asked questions and answers about getting a mortgage:
- What components make up a mortgage payment?
A mortgage payment is formed by two elements: principle (the amount of money you borrow) and interest (the cost of borrowing the money). Depending on the lender, a mortgage payment can also contain three other elements: property taxes, homeowner’s insurance and private mortgage insurance. In many cases, a lender will choose to collect a portion of taxes and/or insurance in every mortgage payment and hold it in an escrow account, resulting in them paying the property taxes and homeowner’s insurance when it is due.
- How do I determine how much I can borrow? Prequalification?
First time homebuyers should consider getting prequalified before house hunting. This allows you to look for homes within your price range. Prequalification is simply an estimation on the amount that you will be able to borrow from a lending institution. There are no costs or commitments when getting prequalified, the process is to simply help you narrow down your housing options and know how much you can receive for a loan.
- What components affect my loan approval?
Ameris Bank has four components that they take into consideration when considering each loan application submitted. As a lender, Ameris Bank has to have guaranteed proof that you can make your loan payment; therefore, they have to gain information about your income. Once your income status shows that you are reliable, your current debt and credit history has to be taken into account.
When purchasing a home, you will also have to pay the fees associated with getting a mortgage process, plus down payment and closing costs. Assuring that you have additional funds available for a down payment and closing costs are essential in the process of obtaining a loan.
Another aspect associated with buying a house is obtaining an appraisal of the home. This shows the market value of the house and confirms that it is worth the asking price. These components come together to reassure both you and the lender that each of you are doing your part to move forward with your investment.
Note that other eligibility and requirements may apply when seeking loan approval.
- What is the difference between a fixed-rate loan and an adjustable-rate loan?
With a fixed-rate mortgage, the interest rate stays the same the entire term of the loan. The payment you make will be stable and secure. With an adjustable-rate mortgage, the interest changes periodically based on the market index rate, meaning your payments change. There are advantages and disadvantages to each type of mortgage, so be sure to talk to an Ameris Bank Mortgage Banker to learn which type of loan is better suited for you.
- How much money do I need to get started?
In most cases, to begin your homebuying process, you will need a minimum of $5,000 to get started, but it can be significantly more depending on the purchase price of your home and the type of loan you choose. You will need money for the actual down payment, which differs based on a variety of factors. You will also need money in savings for an inspection and survey of the home you are looking to purchase. Closing costs are usually when things start to get a little complicated. These costs may run up to two to three percent of your loan amount. Note that Ameris Bank offers a variety of first time homebuyer loans that offer down payment and closing cost assistance.
Purchasing a home can be exciting and nerve-wracking at the same time, especially for a first-time home buyer. Based on the frequently asked questions above, we recommend achieving these simple steps to make your homebuying process easier:
- Deal with your debt now — this helps your debt ratio tremendously.
- Penny pinch — you will need a good amount of cash to get started.
- Get organized – lender will require documentation.
- Create a wish list — know what you want in your home.
- Research – Know your rights and find a trustworthy Realtor and inspector.
When you’re ready to begin the buying process, visit www.EssexHomes.net and we will assist you every step of the way. For more information on home loans or how you can get started with the home loan process, visit www.essexhomes.net/financing.