Purchasing a home for the first time is one of the biggest and most exciting milestones in your life, although it can also be one of the most overwhelming experiences to go through. There are many steps to purchasing a new home, as well as taking on a whole new role of responsibilities.
If you are a first-time home-buyer, having a clear understanding of the entire buying experience from start to finish will give you a huge upper hand. Start at the foundation of what you need to know before you even start looking – what you can afford. Get pre-approved for a mortgage before you go looking and get your heart set on a home outside of your price range. Also, do not be mistaken on what a pre-approval is. A pre-approval is what you can afford, and what price range you can start looking at – not your mortgage approval. Along with your pre-approval, you will need to have a down payment of a minimum 5% - 20% of the pre-approval amount. Depending on your credit rating, the percentage varies. Many first-time buyers are still paying off other debt such as student loans, car loans, credit cards, etc. If you have a strong credit rating, you may only need to put 5% down, but if you are unsure of your credit rating, be ready to provide up to 20%.
Additional fees also come into play besides your down payment. Appraisal fees, legal fees, taxes, moving expenses and house insurance are the major ones to name. Before you can officially become a new homeowner, these are fees that must be paid.
To give you an idea of what you should be budgeting for, closing costs such as lawyer fees, registering your mortgage, registering title usually range from $1500-$2200, while home inspections start in the $400 range. Both of these are extremely important fees to budget for, and can be the deciding factor in purchasing a property.