First Time Home Buyer
It can be exciting and overwhelming to purchase your first home. Here are helpful basics.
Rent V. Own
As one of the nation’s top mortgage companies, Fairway helps individuals and families achieve the American Dream of homeownership every day. Currently, in the northeast market, rents have been trending up making home ownership more affordable than renting for many. Home ownership also brings the added benefits of potential tax deductions, opportunity to build equity and stabilize your housing costs. Not sure if now is the time to purchase a home? We can help…
How to Know What You Can Afford
To get a sense of what you can afford, you can use our mortgage calculators. But to really have a complete financial picture of the cost involved and your eligibility for a home loan, you should speak directly with a lender.
Saving for a Down Payment
One of the first things you should do is meet with a lender to discuss how much house you can afford, including how much you will need for a down payment. Most people expect that they will have to make a 20% down payment, but there are certain programs you could qualify for that could require less than that. If you are putting down less than 20% you most likely will need PMI (private mortgage insurance). Again, a conversation with your lender is a must. Once you know how much you will need to save and how long it will take, prioritize that in your budget. It may mean making tough choices, cutting back, and allocating any bonuses or windfalls to your down payment savings-but it will be worth it. Think a down payment would make a great gift? Remember there may be certain limitations depending on your loan program, you most likely will need a gift letter, and there may be a tax consequence for the giver. Always discuss with your lender, first.
Your credit is one of the most important things a lender will look at when qualifying you for a mortgage. (Most important is paying your bills on time!) If you want to purchase a home you will need to establish credit, both revolving and installment. You can check your credit score for free annually and be sure to resolve any disputes you find before applying for a home loan. In short: Keep your balances low, pay bills on time, spouses should have separate credit cards, and keep the number of credit cards you have to a minimum.
Putting Together your Winning Team
Your team will consist of your lender, an attorney, a real estate agent, and an insurance agent (unless you purchase a condo that does not require additional homeowner’s coverage). Others involved in the transaction will include the home inspector, home appraiser, and the listing agent. Your agent and lender will be the most important choices you make. Get referrals from family and friends, do your research online, and then interview 2-3 before making your decision. Make sure you are confident your agent understands your needs and can negotiate on your behalf effectively. More than just the best rate, your lender should be able to answer all of your questions, explain the process clearly, and identify the best program for your financial circumstances and goals.
Mortgage Application Check list
Here is a list of the documents you will need to have on hand when applying for a home loan. You may be asked to update these docs during the mortgage process, so be prepared. If your lender asks for a document, the faster you can get it to them, the better. A delay in receiving documents can impact the closing date. Here is an overview of the loan process, which can take anywhere from one to three months to complete (based on when documentation is received, closing dates, and appraisal turn times).
What Goes into a Mortgage Payment (PITI)
Principal-the amount of your monthly payment allocated to the loan balance.
Interest-the portion of monthly payment allocated to what the lender charges for loaning the money.
Taxes-the property tax is typically escrowed and paid out as part of your monthly loan payment.
Insurance-homeowners insurance is included in your monthly mortgage payment as well.
PMI-depending on your down payment amount and type of loan, PMI (private mortgage insurance) may also be included in your payment if it is required as part of your loan.
Condo or Home Owner’s Association (HOA) fee- paid separately to the HOA for general upkeep of the shared spaces of the property.