First Time Buyer - Thing to Know

Buying a home could be nerve-wracking. Starting with figuring out whether buying a home is the right choice for you. If you end up deciding to go that route, then you need to figure out a neighborhood that meets your requirements. If you have lived in and know the town or city where you are looking to buy a home, choosing the neighborhood could be easy. Others who are relocating to a new location will need to find a neighborhood that meets their budget and requirements. Asking co-workers, friends, and family who live in the neighborhood could be a good starting point. Several online resources are also available to research the crime rate, demographics, and schools. Then you need to figure out your budget. Your budget will affect not only the type of home you can buy but also the neighborhood where that home will be. Then you will need to find a lender to finance the purchase of your home.

Most homes in the United States are financed by a loan, also known as a mortgage. A mortgage loan is a loan used by buyers of real estate property to finance their purchase. The loan is "secured" on the borrower's property through a process known as mortgage origination. This means that a legal mechanism is put into place that allows the lender to take possession of and sell the secured property ("foreclosure" or "repossession") to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms. A mortgage can also be described as "a borrower giving consideration in the form of collateral for a benefit (loan)".

Real estate investments can be financed in two different ways: by governmental or commercial sources or by institutions. A homebuyer or builder can obtain financial aid from savings and loan associations, commercial banks, savings banks, mortgage bankers and brokers, life insurance companies, credit unions, federal agencies, individual investors, and builders.

It goes without saying that choosing the right neighborhood is important to making your home purchase for long-term happiness and a fulfilling experience of being a homeowner. Some of the items to check in a neighborhood are crime rate, school rating, amenities, and walkscore.

When financing the purchase of your home, a buyer has to pay fees to their lender. These costs vary widely between lenders, and buyers must do their due diligence when choosing a lender. Some lender fees are:

• Originantion fee - typically between 0.5% and 1% of the loan amount, a loan origination fee is charged by lenders to cover the costs of processing the loan. Some lenders do not charge this fee; however, the interest rate on the loan they make is typically higher than the once who charge an origination fee.
• Allication fee - this fee is collected when a buyer applies for a loan.
• Prepaid interest - this fee is interest on the mortgage between the closing and first billing cycle.

These fees are part of the due diligence costs borne by the buyer as it relates to ensuring the condition of their new home. Too many times, a buyer gets stuck with thousands of dollars in repair or replacement costs soon after they move in because there are serious foundation problems or appliances like an A/C or furnace break down. A home inspection can spot issues with appliances that are part of the sale. Buyers can request rebates or even withdraw their bids if the property or appliances are in poor condition. Attorneys do title searches and inform buyers if they find problems with them. In some states, including Texas, a title company performs this task. Attorneys review the terms of the contract and make changes. They also make sure that all paperwork related to the sale of the property is drawn up and filed properly with the authorities.

These are non-negotiable recurring costs that are generally assessed and paid annually. If the home is financed, these costs may be collected monthly and stored in an escrow account maintained by the lender to ensure that funds are available when it's time to pay.

These taxes are collected by the local government and are typically around 2% of the assessed value of the property. Most of the funds collected help pay for public schools and other public amenities like public library, police, fire department etc.

Homeowner's association (HOA) fees are charged if a house is part of a homeowner's association. These fees are used to pay for amenities and common services provided by the homeowners association. Some of these services include snow removal and lawn and park maintenance.

It is advisable to have adequate homeowner's insurance to cover losses to your home from severe weather or other catastrophes. If the purchase of a home is financed, then the lender will, in all likelihood, require the buyer to get adequate homeowner's insurance. When shopping for homeowner's insurance, remember that most policies do not cover damages from floods. If the property is in a flood-prone area, a separate flood insurance policy is advisable. Additionally, if there is a pool on the property, a higher liability coverage is recommended.

Maintaining your property in good condition is important to maintain its value and the desirability of your neighborhood. Homeowners should keep their front yard well maintained and clear of litter. A monthly expense of $100 to $200 is recommended to be allocated towards yard maintenance. Other expenses may arise from fixing or replacing appliances in your home. On average, a homeowner could expect repair and maintenance expenses of around 1% of their home's value.

For a first time buyer, buying a new home could be daunting as it comes with a lot of work and expenses. Most homeowners, however, feel a sense of security and belonging to the community once they buy their home. A first-time buyer must completely understand all the responsibilities that come with being a homeowner and all the costs that come with it so that, in the end, they can truly enjoy all the benefits and joy that come with owning a home.