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#LifeGoals: A Guide to Buying Your First Home

by Kimanh Moreau | Jan 12, 2018
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If you’re a recent college graduate or a young professional, you may be wondering if homeownership is a realistic goal to add to your five-year plan. We say yes! This is a great time to start building a foundation of financial stability and achieve the dream of homeownership. Owning a home is an empowering experience whether you opt for an urban townhouse or a humble craftsman. Owning real estate also leads you toward a path of long-term financial success. Learn more about how you can make your dreams of homeownership a reality with a few simple guidelines!

Start Planning Now
The larger the down payment you have for a home, the lower your monthly mortgage payment will be. The most important number to keep in mind is the ideal down payment amount should be at least 20 percent of the home’s price. Saving $20,000 for a down payment may seem daunting, but it can be a manageable goal with monthly savings. Keep in mind some of our first time home buyers get into a home with far less than $20,000 by using programs allowing them to finance at up to 97 percent of the home amount. For example, someone purchasing a $200,000 home using these options would need $6,000 down plus closing costs of $3,000 - $4,000, meaning they can move in for $10,000! Be sure to consult with your banker and loan provider to find the best financing option for your home purchase.

The earlier you start saving the better, and small monthly contributions add up in a big way! Get started by using mortgage calculators to figure out how much you need to save based on the cost of the home you want in the future. While building up your savings, it’s also important to and develop a plan to establish or strengthen your credit score. Paying off debt, such as student loans, car loans or credit cards, is simple way to improve your credit over time and put your finances in a strong position for when you’re ready to buy a home.

Review Your Priorities
Deciding what kind of home you want to buy is a significant and highly personal decision. When selecting your ideal home, think about current and future priorities. The type of neighborhood you live in will have a long-term impact as your lifestyle may change to include a family, requiring different amenities than those you seek when you’re younger. These are all variables to consider because when you purchase a home, chances are you’ll live there for several years if not longer. Research local news on the neighborhood, crime rates and school districts and visit the area frequently to ensure it’s the right fit before making a final decision.

Getting a Loan
Meet with a home loan expert at your local Columbia Bank branch to review your finances, income and debt to identify your ideal budget for a home. This will help you narrow down your search and ensure you only see properties you can potentially buy. This step is particularly important as some realtors may exclusively show homes to those who are already pre-qualified for a loan.

Before you start looking at potential homes, get pre-approved by a reputable third-party to help establish the parameters of your home search. It’s recommended that about 20 percent of your income goes toward housing costs to maintain a comfortable budget. There are grants and programs to provide additional assistance, such as VA loans, HUD and FHA. Once you’ve secure a down payment, it’s smart to have an additional small savings put aside on reserve for home repairs and upkeep. As a homeowner, you’ll need to be prepared to fix any problem that may arise, and be ready to foot the bill on annual taxes and fees.

Shop Around
The most exciting part of purchasing a home is shopping for your new abode! Take time to check out all of your options and compare market values in different areas to make sure you are getting a good value. While you’re shopping, consider factors such as the price per square foot and nearby amenities so you end up with the best home in a neighborhood at the top of your list.

Move In
After you find your dream home, you can work with a real estate agent to make that dream a reality. You’ll need to complete a required inspection to learn more about the condition of the home. The inspection can help determine any potentially costly or extreme repairs that may result in additional negotiations you may want to propose before proceeding with the purchase of your house. Once the deal is closed on your home, you’ll have to pay closing costs such as escrow fees, underwriting fees and property taxes. The total cost of these fees can run between two and five percent of the total cost of your new (or new to you) house.

Learn more about the home buying process and start your journey by contacting a banker today!

 

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