While purchasing your first home is an incredible and life-changing experience, it can also be overwhelming, especially in such a competitive market. Between saving for your down payment, navigating closing costs, and budgeting for your first time home buyer loan, the numbers can quickly add up. So, to prevent yourself from breaking the bank, it is important to understand how much money you really need to buy a house.
At BrightPath, we will use our expertise and experience to ensure you receive the first time home buyer loan you need to get into your house with ease.
Saving for a Down Payment
You have probably heard it said that you need to have 20% of the value of your new home saved for your down payment. Depending on the price of the property you are interested in, this can add up to several thousand dollars, which may not be feasible for your budget. However, with certain first time home buyer loans including FHA loans and VA loans, your down payment can be as low as 3.5%. While this makes it easier to get into your first house, it is important to note that you will be obligated to pay PMI (private mortgage insurance), which will be added to your monthly payment. So, it is important to weigh the benefits versus the additional costs to determine if this is the right option for your finances.
Understanding Closing Costs
As any homeowner will tell you, one of the most challenging aspects of buying a home is dealing with expensive and unexpected closing costs. These include application and appraisal fees, credit report costs, origination and appraisal fees, and title insurance fees. While they may not seem high, they can quickly add up and drain your savings if you are not careful. To help navigate this issue, research and shop around for lenders that offer the best rates. You should anticipate spending between 2-5% of the property value on closing costs.
Budgeting for Your First Time Home Buyer Loan
While there are several loan options available, it is important to understand how mortgage payments are structured to properly budget for your first time home buyer loan. The components that make up these loan payments are known as PITI and consist of the principal, the interest, the property taxes, and the homeowner’s insurance. The property taxes go towards funding public amenities and are calculated by multiplying the fair market value of your home with the tax rate in your area. It is rolled into your monthly mortgage payments to prevent you from being blindsided by surprise fees. The homeowner’s insurance is required by the lender to secure your home and is also rolled into the monthly mortgage cost. While the coverage can vary based upon the first time home buyer loan you choose, it can include flood insurance, hazard insurance, loss of use coverage, personal liability insurance, and more.
Get the Right First Time Home Buyer Loan to Suit Your Needs with BrightPath
At BrightPath, our mortgage lenders understand that the journey towards homeownership can be fraught with confusion and unexpected costs. That is why they will utilize their specialized skills and passion for customer service to ensure you select the right first time home buyer loan for your finances and your future.
To learn additional information about first time home buyer loans and to schedule a consultation, contact us today.
At BrightPath, when you ask, we answer.