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  • Tips to help you buy your first home

  • Minneapolis, MN: Congratulations on making the decision to buy your first home.  It is exciting and scary...  here are a few tips to make it go smooth.

    Stay safely affordable

    Don't overbuy. You probably have a maximum monthly payment number in your head.  Discuss this amount with your Loan Officer. They will let you know if that is considered a safe payment for your income, or if you are stretching to an unsafe payment. It is important, because mortgage lenders don't take into consideration things like car insurance, medical insurance, and daycare into their debt-to-income calculations.

    The number your Loan Officer will estimate is the PITI payment, which means the whole payment: Principal, interest, taxes, and insurance - and mortgage insurance if you have a small down payment. Again important because most mortgage calculators I see online leave much to be desired in terms of accuracy of the full PITI payment.

    Cash-to-Close Requirements:  Most people understand down payment. What people miss, especially first time home buyers is that there are also closing costs. Closing costs could be about 3-7% of the total loan amount and will appraisal, credit report, title company charges, lender fees, county recording fees, and even things like the first years premium for home owners insurance

    Don't forget Utility costs. Many times the seller can give you an idea of what their utilities costs have been - but take that with a grain of salt.  Maybe they love their thermostat at 75 all winter.  Then again, maybe they've been keeping it at 65 all winter. Be realistic, this can help prevent being surprised by a higher utility bill than you're expecting.

    Don't forget miscellaneous expenses. Be sure to budget for moving expenses and additional maintenance costs. Newer homes tend to need less maintenance than older ones, but all homes require upkeep. If you're considering a condo or a home with a homeowners association (HOA), remember to include HOA dues in your budget. Keep in mind that you should have an emergency fund on hand to prepare for any unexpected changes in your income (like reduction in your wages) or unexpected expenses (like medical bills).

    Manage your debt carefully after your home purchase. Sometimes your home will need new appliances, landscaping or maybe even a new roof. Planning for these expenses carefully can help you avoid one of the most common causes of missed mortgage payments: carrying too much debt. It's important not to overextend your credit card and other debts so you stay current on your payment.

    Research your mortgage options and Loan Officer. As a first-time home buyer, you’re undoubtedly anxious and excited about moving into your new home, but take the time to step back, find and talk with an experienced licensed mortgage professional is important - and you generally don't find those people at the bank or big internet lender.  Talk with the local mortgage broker down the street for the best experience.

    Know your credit score. Before you start looking at homes, make sure your credit is in tip top shape. Great credit means many loan options, and the best interest rates. Low score means loan denial, limited options, and higher rates. Next, understand that credit scores from places like Credit Karma, and your credit card statement, while real credit scores, and NOT the same credit scores mortgage lenders use. Typically the scores lenders see are LOWER than any score you can see on your own.

    Get properly prequalified for a mortgage right away. A proper pre-approval will require you to submit an application, along with all your basic supporting documentation, like W2's, pay stubs, and bank statements. No matter what any lender says, if you didn't submit documents, you can't be pre-approved.

    Another tip is while you can submit an application on your smart phone while standing in front of a home you like, that is also NOT any sort of valid or real pre-approval. Their is no 'quick' way to get instantly approved in the mortgage world.

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