Financing Your New Home
Buying your first house can be very exciting. But financing your home purchase can be a challenging experience.
Deciding how much to spend on your home and which type of mortgage will work best for you – as well as understanding the settlement process – can be confusing. Here are a few tips may help you with the process:
- Get familiar with the lingo. Visit HERE for mortgage basics, a home buyer’s dictionary and information on financing, insuring and settling on your new home.
- Figure out what you can actually afford to pay on a monthly basis. When determining the monthly payment you can afford, remember that, in addition to the monthly principal and interest, you will also be paying into escrows for property taxes, hazard insurance and possibly a homeowners or condominium association assessment.
- Pay down your debts. Debt that you carry on your credit cards will limit what you qualify for from a lender. Lenders want to see a total debt service ratio that is less than 40 percent of your monthly income.
- Attend a first-time home buying seminar or talk to a credit counselor who does not work for a lender. You can research your options without being influenced by someone who has a financial interest in the home or loan you choose. When you have done your research and are ready to move on to the next step, visit a lender, understand the loan choices that would be available to you, and, once you’ve determined the most suitable loan, get pre-approved for that loan. Since you will already know how much money you can borrow, you will know what price range you should be looking at and can move quickly if you are bidding on a house that has several interested buyers.
Selecting a Builder For Your New Home
Once you have thought about the type of house you want, and you have determined how much you can afford, you will need to find a builder:
- Go to our Member Directory to obtain a list of builders who construct homes in the Cedar Rapids area.
- Look in the real estate section of your local newspaper for builders and projects. Looking through the ads and reading the articles can help you to learn which builders are active in your area, the types of homes they are building, and the prices you can expect to pay.
- Local real estate agents (See our Member Directory) may also be able to help you in your search. Ask friends and relatives for recommendations. Ask about builders they have dealt with directly, or ask them for names of acquaintances who have recently had a good experience with a builder.
- Ask friends and family.
Do Your Homework
Once you have a list of builders, how can you find out about their reputations and the quality of their work? The best way to learn about builders is to visit homes they have built and talk with the owners.
- Ask builders on your list for the addresses of their recently built homes and subdivisions. Builders may even be able to provide names of some home owners who would be willing to talk with you.
- Drive by on a Saturday morning when home owners may be outside doing yard work, or playing with their children. Introduce yourself and say you are considering buying a home from the builder who built their home. Talk to several owners, and try to get a random sample of opinions. The more people you talk with, the more accurate an impression of a builder you are likely to get. At the very least, drive by and see if the homes are visually appealing.
- When you talk to builders and home owners, take along a notebook to record the information you find and your personal impressions about specific builders and homes. Doing so will help you to make comparisons later.
- Usually, people tell you if they are pleased with their homes. And if they are not, they'll probably want to tell you why.
Shop For Quality and Value
Look at new homes whenever you can. Home shows and open houses sponsored by builders are good opportunities to look at homes. Model homes and houses displayed in home shows are often furnished to give you ideas for using the space. You may also ask a builder to see unfurnished homes.
When examining a home, look at the quality of the construction features. Inspect the quality of the cabinetry, carpeting, woodwork, and paint. Ask the builder or the builder's representative a lot of questions. Get as many specifics as possible. If you receive the answers verbally rather than in writing, take notes. Never hesitate to ask a question. What seems like an insignificant question might yield an important answer.