If you’re beginning to think about buying Long Island real estate for the first time, you’ve probably realized that there’s a lot you don’t know about the loan process, home values, down payments, and mortgage insurance. Here are four little-known tips for first time homebuyers that may make the process easier and less stressful.
1. Make sure you have enough money to cover closing costs. The closing is the actual purchase of the real estate, the day that it becomes yours. The money you’ll need to have in order to cover closing costs is more than just the down payment. It also includes title insurance, attorney’s fees, recording fees, the pro-rated taxes for the year, and everything that goes into escrow if you decided to use it, including around 15 months of your homeowner’s insurance, around seven months of your taxes, and your mortgage insurance premium if you put down less than 20%.
2. Pre-qualify for a loan before you start looking at houses. Sitting down and talking with a mortgage broker before you step foot in any real estate on the market will give you a realistic idea of how much house you can afford. Remember, you’re paying homeowner’s insurance, taxes, and sometimes other costs on top of your principle and interest every month. The broker will be able to give you an idea as to how much your interest rate will be and can show you different purchasing scenarios.
3. Putting more money down than is required by your loan is never a bad idea. If you’re looking to put less than 20% down, you’ll have to pay mortgage insurance every month, which is calculated by taking a percentage on what you still owe on the loan. This is money that you pay that you won’t get back in investment value. In fact, you can’t remove this cost until you owe less than 80% of the selling price of the house. The more you can put towards this number, the more money you’ll save in the long run.
4. Real estate investments aren’t recession proof. As many people learned during the recent housing bust, home prices aren’t guaranteed to go up. In fact, it’s possible that they can fall so much that buyers can wind up owing more than their “investments” are worth. Predicting future value is really difficult because it depends so much on human whims. However, if you’re looking for the stability of owning your own piece of property, and you’re emotionally and financially ready, it’s the right time to buy for you.
Purchasing real estate is part of the American dream, and it’s a goal held by many people. We’ve all heard advice about buying when the market is low, looking in neighborhoods with good schools, reading carefully through the inspection reports, and making sure you completely understand all the loan documents. However, these four tips are advice that many newcomers aren’t given.