Buying your first Home

Buying your first home in Kentucky,
Here is a great outline of the steps involved in buying your first home:

"It’s a big decision to make, the jump from renter to homeowner. Being able to own a home comes with many rewards — equity buildup, tax advantages and, of course, having something you can call your very own.

When you’re considering buying, it’s a good idea to pick a real estate agent to help.

“We will offer some insight on how the real estate process works,” said Scott Johnston, president of the Aberdeen, S.D., Board of Realtors.

It’s important to let your real estate agent know exactly what you’re looking for in a property -- whether it’s a two-car garage, a finished basement, an updated kitchen or a big back yard. An agent can also help you make informed decisions about the neighborhood you are considering, the quality of the schools, taxes, traffic volume and more.

Another advantage to obtaining a real estate agent’s service is that he or she has immediate access to homes as soon as they are put on the market.

GET PRE-APPROVED

Before you start looking, get pre-approved by a lender you trust. Getting pre-approved by your lender’s mortgage specialist will help you zero in on a price range. Also, if there are any credit blemishes, they can be addressed at the early stages of the process.

There are several types of mortgages available.

A popular example is a fixed-rate mortgage. In a fixed-rate mortgage, your interest rate stays the same for the term of the mortgage. There are no surprises with a fixed-rate mortgage - a borrower always knows exactly how much his or her mortgage payment will be.

With an adjustable rate mortgage, your rate and payment can change either up or down, as often as once or twice a year. The advantage is that you may be able to afford a more expensive home because your initial interest rate will start out lower.

MONTHLY PAYMENTS

Buyers must also be aware that their payment will not only reflect the principal and interest that was borrowed, but will also include an escrow payment for real state tax, homeowners insurance and PMI. (PMI is a financial guaranty that protects lenders against loss in the event that a borrower defaults. A premium is paid by the borrower and is included in the mortgage payment.)

Depending on the location of your home, you might have to include flood insurance and association dues.

Remember that during the life of the loan, you’ll pay far more in interest than you will in principal. Because of the way loans are structured, in the first years you’ll be paying mostly interest in your monthly payments.

MAKING AN OFFER

If you make an offer on a home and your offer is rejected, don’t feel defeated — keep negotiating. It’s normal for it to be a back-and-forth process. If an appraisal comes in too low, don’t worry — it just offers up another opportunity to negotiate.

EARNEST MONEY

When you make an offer on a home, your real estate broker will put your earnest money into an escrow account.

“It can be as little as $1, but normally it’s $500, $1,000 or $2,000,” said Johnston.

This will be money the buyer needs to come up with when an offer is accepted.

Earnest money is usually applied to the buyer’s down payment or closing costs. If your offer is not accepted, the buyer’s money will be returned to you. But, if the buyer backs out of the deal, earnest money might be lost.

DOWN PAYMENT

The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20 percent of the purchase price. For others it might be less.

“Normally, you can get by with 5 percent down, depending on price range,” Johnston said.

Buyers might be able to obtain their down payment through means other than their own checking or savings account.

Johnston said options could include an employer-sponsored program, or seller concessions (when the seller pays part of the closing costs or down payments). Buyers can also use a relative’s or friend’s “gift” for the down payment.

Ask your real estate agent or mortgage specialist for details.

HOME INSPECTION

If you are considering buying anything other than a newly constructed home, it’s a good idea to get a home inspection.

A home inspection is a visual examination of the physical structure and systems of a home, from the roof to the foundation.

“If I was going to spend thousands of dollars on a home, I’d certainly spend a couple more to make sure of the home’s condition. It will not only show you what you need to be concerned about, it will also give you peace of mind,” Johnston said.

Another way to achieve peace of mind is to purchase a home warranty program for your newly acquired property. Again, not necessary on a newly constructed home, but if you are buying an older home with used appliances, it may be well worth your while.

A home warranty is a service contract, which helps protect homeowners against the cost of unexpected covered repairs or replacement on their major systems and appliances that break down due to normal wear and tear.

“When you buy a home, the last thing you want to do is come up with another $1,500 for a new furnace,” said Johnston.

However, the warranty programs will not cover pre-existing conditions.

CLOSING

When you close on your home, you will sit with a closing agent and most likely your real estate agent. You will sign a stack of papers, you will need to provide proof of homeowner’s insurance, identification, usually a certified or cashier’s check for the down payment or closing costs (closing costs usually include an appraisal, survey, loan origination fees, title work and recording fees).

When you apply for your loan, your lender should give you an estimate of the closing costs, so there won’t be any surprises when you sign on the dotted line. From : Putting your money in your own nest egg:

Call Dick Watts Insurance 502-245-3625 for a free Homeowners Insurance Quote