Getting qualified to buy your first home and what to know

When purchasing (buying) your first home there are many items that you should consider before you even start looking. The first place to start is “How much home can you afford?” If you’re not sure, then you won’t know what you’re even getting into when looking. Many people have a good idea how much they can afford for a payment but have no idea how that translates into purchase price. The general rule of thumb in the current market (where interest rates are right now 6%-7.5%) is about $7-8 per $1000 financed. For example, a $100,000 loan amount would cost roughly $700-800 a month for a payment. Now once you understand this, let’s say you can afford a payment of $1400-$1600 a month. You should be able to buy around a $200,000 home — maybe even higher — depending upon the exact interest rate you qualify for.

     The next step is to get into contact with a loan officer to establish what the rates and other fees will be for you to purchase the home. They will have you fill out a loan application and many times bring in additional information (W-2’s, bank statements, pay stubs) to verify the information on the application. Generally speaking, the “closing costs” (the cost to complete the loan for the purchaser) will run about 3%-5% of the loan amount depending upon the purchase price. The lower the purchase price the closer to 5% it will cost. For example, a $200,000 loan should cost roughly 6k-8k to complete all functions of the loan. (This cost does not included any buy downs or additional costs typical of some ALT-A loan programs.) The loan officer will walk you through the entire process and should also explain different financing options and payments. Also a good loan officer will explain the benefits of buying the interest rate down, and looking into other loan programs such as interest only, 15-year amortized loans, etc. A good loan officer will save you thousands on your loan just by finding ways for you as a buyer to qualify for a better rate or the perfect loan for your needs. One loan officer I highly recommend is Marissa Thomas with Infinity Funding here in Tucson AZ. She is highly competent and takes the extra time with purchasers to find the perfect loan for their needs. Her phone number is (520) 250-2902.

     Buying a home is an easy process and can be very financially rewarding. The most intimidating part of buying is the loan process and all that it involves.

This entry was posted on Sunday, August 26th, 2007 at 2:39 pm and is filed under First Time Buyers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.