Buying your first home is an exciting time, but due to the unfamiliar processes involved and often fast paced environment things can turn from exciting to overwhelming quickly. Luckily, there are some key terms that are universal enough that they will be helpful to any first-time buyer. Whether you are currently in the market or simply setting the wheels in motion to start this process in the future, arm yourself with some background info so that excitement for this accomplishment can take center stage. 

Money Talks

You probably are already familiar with terms like ‘mortgage’ and ‘down payment’, those are big ones. But there is more to the financial aspect of buying a house than just these two phrases imply, additionally the terms ‘mortgage’ and ‘down payment’ also have layers. There are a variety of different loans available to home buyers. Comparing and contrasting your options will help you make the best choice for your long-term financial health. 

The lifespan of your loan is going to heavily dictate the rest of the terms. Conventional loans are typically long-term, but buyers do have short-term options such as 15-year fixed-rate loans. Consider your overall budget when you think about which option is most appropriate for you. Especially for a first-time buyer, selecting a huge financial obligation such as a mortgage that is too aggressive could end up collapsing not just your credit score but your financial standing in general.

Hidden Extras

If you decide to work with a realtor then many of the extra costs associated with purchasing a home will be in plain sight and dictated to you. However even so, first-time buyers are often surprised when they find out that there is more that goes into acquiring a home than simply the purchase price. Home inspections are not always required but they are almost always recommended. While these inspections can save you plenty of money and headaches by finding any potential problems, they are not free. As the buyer you will be responsible for covering the cost of this service. Closing costs are another set of payments that are less than obvious. The total for these costs will vary and can sometimes be worked into the negotiation of the sale, but be mindful of this expense before you put in any offers, so you are set up with the cash to cover it. 

Pre-Approval vs. Pre-Qualification

These items are closely related but in fact not the same. A pre-qualification is essentially a less formal version of the pre-approval process. Both processes will help you to determine your budget because they will loosely tell you the range of approval you are eligible for from banks and other lenders. In some cases, sellers require one of both documents for buyers to make an offer on their home to cut down on the timeline for closing. If you do get pre-qualified, then a pre-approval is the next step. If you create a relationship with a mortgage broker at this stage that can help speed things along in your house hunt especially if you get into a multiple offer situation and lose out. Your approvals can follow you to the next step of the search.