This week, mortgage interest rates have dipped down once again to historic lows. A thirty year fixed rate mortgage for a client with a 740+ credit score (and other qualifying factors) can be as low as 3.625%.
So what does this mean for first time home buyers in North Carolina? The simple answer is it is one of the best times you can imagine to buy a new home, but you need to be smart about it. This is when doing a little due diligence and working with a reputable mortgage banker like Alpha Mortgage can save you a great deal of time and stress. Here are some tips we have put together for first time home buyers.
Know your limits
Do you know how much you can afford? It’s not just about how much it will cost over fifteen or thirty years, but how much will it cost you every month. When you work with Alpha Mortgage, we will go over with you what is called the debt to income ratio. This is a formula that will determine how much you can afford based on what you make and what you owe (such as credit cards, car payment, etc.).
Once you have determined what mortgage amount you are pre-approved for, you next need to begin factoring in how much you can truly afford each month. This means writing down all the costs you know you are going to have including homeowners insurance, estimated energy costs, water and sewage, home owners association dues, property taxes and more. These are all variables that will change depending on the area you live in. This is where due diligence comes into play.
A great way to go about this is to select three different areas or neighborhoods you would like to live in. Then find out which energy company supports the area and call to find out the average household cost per year and then do the same with your water and sewage company. If you are looking in a city, call the tax office to find out what taxes residents are expected to pay. Next you need to call around to different reputable insurance companies and talk with an agent about what kind of cost homeowners in each area typically pay. They may not be able to give you exact numbers, but it will give you something to work with. Make sure you find out if the areas or neighborhoods you are looking at have a home owners association. If they do then find out what the monthly dues will be. Always keep in mind there will be expenses that will arise that you will not expect such as vehicle repair. It is always a good idea to add in an extra amount each month to cover unexpected costs.
Once you put together an estimate of what your total monthly costs will be, it will help greatly in determining how large of a mortgage you can truly take on comfortably. Being educated and informed can be daunting for first time home buyers because there is so much you have to think about when it comes to monthly finances, but once you go through the process you can truly find the area and neighborhood that is right for you and you will never have to second guess yourself. When you purchase with confidence it makes all the difference in the world.
At Alpha Mortgage, we’re here to guide you through this process. There are many different mortgage programs out there and we’re going to get to know you, help you understand your financial situation and then make a recommendation on which program will benefit you the most. If we determine that you would be better off waiting a few more months or a year so you can save up or build your credit rating, we’re going to be honest with you. An educated client is an empowered client and when you succeed we succeed. Call us today and let us help you get started on the path to home ownership in North Carolina. Click here for a listing of our branch offices.