Purchasing A New Home? Points To Consider

People will plan for months or even years before they finally make the decision to purchase a new home. will change your life considerably. Change, especially one that is this significant should be considered at length and with the involvement of everyone in the family. If every member of the family is not involved in the decision making process they may not feel that their feelings and needs are important. Young children are especially vulnerable to emotional turmoil, especially when you consider that they may be leaving friends behind and will be moving into a strange environment.

Begin by assessing your needs. Spend some time to create a needs and wants list. A 3 bedroom 2 .5 bath home may be great because you can use the extra bedroom for an office but you could save considerable money by using a space in the basement for an office. Simply put, match your needs with your capacity to pay for them.  Also, you should spend some time researching your credit score. If you find errors on it, have them removed or attach a note of explanation as allowed by law, before you see your lender.

The general location of your new home is something you should decide on early in the process of purchasing a new home. There is a wealth of neighborhood specific information on the internet today, to aid you in your research. Don’t forget to research the school district, the junior college district, park district, library, commuter stations and access to area highways. Real estate taxes in the area are very important to research as they will directly affect how much home you can afford. It’s important that you connect with the neighborhood you are planning to buy in, because you will be living there a long time if not for the rest of your life.

Talking about connecting with your new home, the same thought goes for the mortgage company that you will be using to purchase your new home. You should also have some sort of connection with the mortgage company and the mortgage consultant who will guide you through your loan process. Remember, your money will be tied to them for quite some time and it’s a good idea to actually have a relationship with them.

Now let’s take a closer look at what a mortgage is. In simple terms, the mortgage is the loan that you will obtain to pay for the purchase of your new home. There are technical differences in a mortgage that vary from state to state but the basics stay the same. It serves as a lien or legal claim to your home and gives security to the lender that holds your mortgage loan. This means a lender can take back your home if you neglect to make your payments; and yes there is a repo-guy for homes too. All mortgages have two things that they share in common regardless of the company you are getting it from: principal and interest. Principal means the original amount of money that you borrowed from the lender. The interest is the percentage that goes on top of the original mortgage loan. The interest is compensation to the lender for the use of their money.

How does a mortgage actually work, you may ask?  First of all, the lender determines the LTV, or the loan to value, ratio of your property. Let’s say the lender will lend a 95% LTV on a property that has a price tag of 50,000. Simply stated this means you can borrow up to 95% of the home’s value, or in this example, 47,500 of the total value of the property. You are personally responsible for the remainder of the money, $2,500, in this example, which can come from your personal savings or in some situations from a gift.

You should never purchase any property without a lawyer. There are many legal documents that you will need to understand. Some of which protect your rights as a new homeowner and some protect the rights of the lender. The lawyer’s responsibilities are to protect you and your future. Think of it as an insurance policy. Should the lawyer make a significant mistake, his or her professional insurance may cover any penalties or losses. A lawyer will also help you to obtain a title insurance policy. This policy guarantees there are no liens, or money owed to other individuals that otherwise owning the property would make you liable to pay for.

They say the home is where we build our dreams and watch them come true. Take your time, do your research, and buy what you can truly afford, or your dream will turn into a nightmare.

 

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