Finances FYI Presented by JPMorgan Chase
Buying a home for the first time has always been an intimidating task. Most of us don’t know what happens in the home-buying process until we go through it ourselves. There are many complications and little details to keep in mind. Add to that the increased competition for homes that exists in today’s market driven by big swaths of the millennial generation who are at last ready to jump into homeownership, and you might feel pretty overwhelmed.
You can feel more informed and in control by getting organized with a checklist of things to do and information you’ll need before you embark on your home search. This checklist will help you navigate the home-buying process with a relative lack of stress and the most responsible use of your finances.
Before making any large purchase, the best place to start is by looking at your existing finances. This will help you understand how much you can afford to spend—both overall and monthly to account for your mortgage payments. Perform a thorough analysis of your budget, bank accounts, and existing home costs to get an accurate idea of how much you can spend, and use this to inform your home search.
Hit the Books
One of the confusing things about buying a home is the language brokers, mortgage lenders, and others use during the process. They use acronyms you may not know or lingo that you don’t necessarily understand, and that can have a significant impact on your finances and your ability to buy the home you want. Find a trusted resource, like the Freddie Mac Glossary of Terms, and study up.
There’s no question that today’s home-buying market is a competitive place. Multiple cash offers and bidding wars are common. Still, one of the best things you can do to help yourself out in these situations is to get pre-approved for your mortgage. This puts you in a stronger negotiating position and helps you better understand how much house you can afford. You can also get quotes from a few different mortgage lenders, which will help you find more competitive pricing and potentially save money.
Find an Agent You Trust
Having a good broker on your side is one of the top things you can do to ensure a smooth home-buying process. There are millions of residential brokers, but some are better than others. Plus, some are more willing to work hard for you and make sure you get what you’re looking for. Ask friends and family who own homes for recommendations. They might be able to refer you to an agent they know and like. These agents typically charge a commission between 5% and 6%, paid by the seller. They can help you navigate an often confusing process.
Budget for Extra Costs
Once you figure out what kind of mortgage you can afford and your down payment, you might think you’re out of the woods when it comes to tallying up costs. Think again. There are several other costs you have to pay to buy a home. They include lender fees, closing costs, home inspection charges, insurance, and additional unexpected costs associated with buying a home. Avoid financial surprises by doing your research and budgeting for these costs and the actual home’s cost.
There’s no question that buying a home for the first time can be a confusing (and even frightening) prospect. However, it should also be exciting and allow you to have a little fun imagining your future in that house. Some preparation can help you make a plan so that you can enjoy the anticipation while still keeping everything in check.
Finances FYI is presented by JPMorgan Chase. JPMorgan Chase is making a $30 billion commitment over the next five years to address some of the largest drivers of the racial wealth divide.