Are You Ready to Buy a Home? Review These 3 Crucial Tips to Find Out!

Are you a first time home buyer at the Lake of the Ozarks? The process is exciting and well worth the effort when you can finally relax in your very own home - and paint the walls! But it can also be intimidating if you haven't been through it before. As experts in the title industry, we have several tips on what you need to know before buying a home at the Lake of the Ozarks. If we can answer ANY questions about purchasing a home at the Lake of the Ozarks, please give us a call. 😊

Evaluate Your Finances 

Explore your finance options first if possible. 

Buying a home is a huge investment; we all know this. But what you might not realize is how much you will want to have prepared upfront. A standard down payment is typically 20% of the purchase price. That means if you're buying a home for $180,000, then your down payment will probably be $36,000. 
There are certain kinds of home loans that will allow you to put down a smaller amount - in some cases as low as 3%! If you are a military veteran, you may also be qualified for a VA loan with a 0% down payment. But beware of what this will mean for your monthly mortgage payment. 
If the down payment is less than 20% of the purchase price, then you will have to pay something called private mortgage insurance until your equity in your home has reached 20% of the loan amount.
What is private mortgage insurance? Private mortgage insurance protects the lender and can cost you up to 5% of the loan amount, per year. 
If we use our $180,000 home example from before, with a 5% down payment, you would have an additional monthly payment of $712.50. Whoa!

But don't worry; there are a few simple tricks to saving up for a down payment. 

Any time you find yourself with extra cash at the end of a month, be sure to transfer that into a separate savings account so you're not tempted to spend it. 
Get a little extra back during tax season? Put it in savings. 
Get a bonus at work? Put it in savings. 
Anywhere you can spare an extra dollar will add up to make a big difference when it's time to write that down payment check.  
Also, if your paychecks come in bi-weekly, then a great way to save a little extra cash each year is to try budgeting based on two paychecks a month. That means you'll have two extra paychecks a year to store away for your future home.

Consider the Type of Home You Want

Knowing what type of home you want to buy sounds like an obvious suggestion. 
But have you considered everything? 

You may know that you want a 3 bedroom, 2 bath home with an open layout. Some questions you can ask yourself:

How many square feet will be comfortable for you and your family? 
Will you need office space? 
How far will your daily commute be? 
Do you need a fenced-in yard for your fur-babies? 
Think through your daily routine and be sure to account for your lifestyle. If you like entertaining large groups of friends and family for the Super Bowl, then a 900 square-foot cabin is not for you.

If you're not quite sure what you're looking for, try going to open houses. Walk around to get a feel for what layouts you like, how much room you really need, and what kind of neighborhood appeals to you.
These details will be incredibly helpful to your realtor when they begin searching through listings to find your dream home.

Look Carefully at Your Personal Background Info

Underwriters are thorough. VERY thorough. 
Their job is to ensure you are someone the lending company can trust with a mortgage. 
Be prepared to answer several personal questions and provide a detailed background of your work history, bank statements, living arrangements, and more. 

If you have any employment gaps, they will ask for something called a letter of explanation. It's exactly what it sounds like. You will write a letter that explains why you weren't employed during that time. Were you staying at home to care for children? Did you have your own business you managed from home? Be honest and thorough. 

When they review your bank statements, they are making sure your finances are stable. If they see any recent large deposits, they will question where they came from. For that reason, it is best to have all your finances prepared and in place 4-6 months before the underwriting process begins. 
Sometimes deposits within that timeframe are unavoidable. Just be aware that the underwriting team will likely request another letter of explanation. If it is a gift from someone wanting to help with your down payment, then you will need to have the donor complete a document called a "gift letter" to verify the funds came from them. 

A big mistake some buyers make is to purchase something large on credit just before underwriting. This kind of activity throws up red flags and doesn't reflect well on your credit. If you're thinking to yourself, "Should I buy a new car before or after buying a home?" The answer is a definitive After! 
Underwriters have declined buyers because they replaced a broken-down vehicle during the buying process and lowered their credit score. Don't lose your dream home! Stick to small transactions leading up to your home purchase.

Be Prepared

Before you decide to buy your dream home at the Lake of the Ozarks, make sure you are ready. There are a lot of other ways to prepare for the home buying process, but three you will want to do right away are ...

  • Review your finances to determine how much of a down payment you can afford.
  • Dream up your ideal home so you know what to look for. 
  • Consider your accounts and work history and be ready to answer lots of questions.

Buying a house can be a complicated process, but you can't beat that first-home feeling!
Let us know if we can help you with any further home buying advice. And when you're ready to choose your title company, be sure to call us at Arrowhead Title for the best title company at Lake of the Ozarks.

The Lake of the Ozarks' Most Trusted Title Company
Where Accuracy Matters!

750 Bagnell Dam Blvd Suite B
Lake Ozark, MO 65049


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