For many us, buying a home, let alone our first home, is pretty stressful. The laundry list of terms and huge amount of paper work can be down right overwhelming. Most home buyers focus on their mortgage, and little else, once they've decided on a property, while this is important, there are countless other factors that need serious consideration.
Your monthly payment WILL change over time
This one surprises many buyers and if you budgeted with little room to spare, you may get an unpleasant surprise a few years in. Even with a 30 year fixed mortgage, your ACTUAL monthly payment, not just payments back the bank or mortgage company, will change. As your property value rises so will the fees tied to the value of your home, this includes property taxes and insurance. Do your research, try to find out how fast home values in your area are going up, look into getting a homestead exemption. You can also talk to your insurance agent to determine what credits can be applied for certain upgrades to your home.
Understand the closing process and related fees
Closing on your new house can be a moment of pride and intimidating at the same time: getting calls and requests from just about everyone, having to open up your entire financial life to strangers. For that reason it's important to keep in mind who the various players are in a closing and what their interests lie:
- Mortgage brokers / Realtors: Realtors help you find your dream home and mortgage brokers help you find an affordable mortgage based on your income. Their fees are collected at closing and their involvement ends once you close and move into your home.
- Title Company: Company hired to help with all the title search for the property as well registering your purchase with the county etc.. One time fees are collected at closing. Just like mortgage brokers, there's usually no further interaction with a title company after closing.
- Insurance Agency: Intermediary between the mortgage/lien holder, the homeowner and the insurance company covering your property. During closing, the payment for the FIRST year of your policy is collected and submitted to the insurance company on your behalf. Your monthly payment is setup to collect 1/12th of your total premium and keep it escrow until you policy renews the following year. The process then repeats each subsequent year after that and the mortgage company pays the insurance premium from the funds in the escrow account.
Of the three main areas, insurance is usually the most overlooked, yet the one with the greatest possible impact on your monthly payment. The key is to:
- Do your research. The more you know the better prepared you'll be.
- Educate yourself not just for the closing but for what happens a few years down the road.
- Talk to a professional We at Aim Insurance are here to help, and can help you navigate this complex process. Contact us for more information.