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Important Tips for First Time Buyers

Have you been saving money for your down payment, searching through listings of houses for sale on the internet, going to lots of Open Houses, dreaming of owning your own home? If you are finally ready to take the plunge into home ownership, you may not know where to begin. Here are some tips for first time buyers.

• Determining if you are ready financially is the first step for buying a home. Check your credit report for errors. Go to www.Annualcreditreport.com. If there are errors, you need to get them fixed. If your credit is poor, then you probably need to wait to buy a home until your credit situation improves.Buying a home in Riverside CA

• Part of this financial step is finding out how much you qualify for and how much you can afford. Some people get pre-approved by their lender for an amount that is higher than they want to go.

• Getting your financing lined up is crucial for first time home buyers as well as experienced home buyers. Talk to two or three different banks and/or mortgage brokers. Find someone you connect with and who offers you a loan and terms that is best for your particular situation. Compare interest rate, APR and lender fees. The difference between interest rate and APR is important. The interest rate is the percentage of the loan amount that is charged to you by the bank for borrowing the money. This amount is very important when comparing quotes because it directly impacts your monthly payments. The APR is a calculated rate that includes the interest rate as well as other lender fees required to finance the loan. This helps borrowers better understand the tradeoffs between interest rates and lender/loan fees paid at closing.

• Before you can start seriously looking at houses you will need to get a pre-approval letter from your lender.

• The next step very helpful for first time buyers is making two lists about your future home: what you “would like to have” and those things that are “must haves”. It is very common for first time buyers to have a list of “must haves” that don’t match their budget. You may have to prioritize your list if you can’t afford everything on your list. When you chose a Realtor® with years of experience, they will be able to help you determine what houses have your “must haves” and are within your budget.

• You will need to have down payment funds available as well as extra cash for closing costs. Your lender will provide a good faith estimate. Closing costs can vary from about 3% of the loan amount to 4% or higher. Here are some things that you can expect to pay as part of your closing costs (This list does not include all of your closing costs - it is just to give you a general idea):

  • Loan origination fee (usually 1% of the loan amount)
  • Loan application fee
  • Loan processing fee
  • Title insurance (required by your lender)
  • Appraisal fee
  • Credit Report
  • Tax service fee
  • Underwriting fee
  • Interest from the day of settlement to the date of the first mortgage payment
  • Private mortgage insurance premiums to protect your lender ($750 to $1750) if you are putting down less than 20% down payment
  • Homeowner’s insurance premiums
  • Property taxes from the day of settlement to the end of the tax year
  • Settlement or closing/escrow fee
  • Document preparation fee
  • Recording feesTax stamps

Many home buyers in California will run into "Mello Roos" in neighborhoods built around 2000 and newer.  Read more here - what are Mello Roos?



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Based on information from California Regional Multiple Listing Service, Inc. as of . This information is for your personal, non-commercial use and may not be used for any purpose other than to identify prospective properties you may be interested in purchasing. Display of MLS data is usually deemed reliable but is NOT guaranteed accurate by the MLS. Buyers are responsible for verifying the accuracy of all information and should investigate the data themselves or retain appropriate professionals. Information from sources other than the Listing Agent may have been included in the MLS data. Unless otherwise specified in writing, Broker/Agent has not and will not verify any information obtained from other sources. The Broker/Agent providing the information contained herein may or may not have been the Listing and/or Selling Agent.