The First-Time Home Buyer's Guide to Mortgages, Titles, and Escrows

For the first-time home-buyer, the process to purchase a home is not an easy one. The process involves the following essential factors: price, affordability, size of the house, and location. The focus of this article is to discuss price and affordability and to look at the financial aspects of home buying.

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Determining What is the Best Fit for Your Family

There is a fine line between the best home for you and your family and what you, as a new home buyer, can afford. Many people have to earn a living to make payments to afford the home of their choice. New couples starting out need to plan for their future by keeping close tabs on all of their monthly expenses. Breaking this down before considering a home is of utmost importance. Young families will have to qualify for a mortgage. It can be helpful to use a mortgage payment calculator to help you determine how much house you can afford. Remember that the type of loan you seek is going to also have an impact at how your mortgage will look - not only for the first few years, but for the years down the line as well.

The Real “Keys” to the Home: The Mortgage

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A mortgage is a legal binding agreement that allows you to borrow money for the purchase of property. The credit union lends the money to buy the home and collects interest payments each time payments are made. There are different types of mortgages: fixed monthly mortgages with a given loan term (repayment period) or adjustable rate mortgages which are riskier due to higher interest rates after an introductory payment period. PMI, or private mortgage insurance, also has to be paid depending on how much down payment is paid upfront. The new buyers will also need to pay closing costs which pays the fees for the brokers and the title company. Before the mortgage documents are signed, other processes need to occur before the final closing.

Title Search and Escrow Period

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After the credit union approves a loan contingent upon the buyer’s creditworthiness and income also known as the underwriting, a title company conducts a title search. This is also the beginning of the escrow period in which the title company verifies certain conditions. A title search involves looking at any encumbrances attached to the property. This could include any outstanding loans, agreements, easements, etc. that could affect the title. These issues need to be taken care of before the new buyers take possession of the property.

Although the home buying process is complicated, it is warranted as it will be the most significant purchase ever made in your lifetime. Knowledge of the steps involved will contribute to a successful transaction. 

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