At Ameris Bank, we believe that there is nothing more important than having the understanding and knowledge of what to expect during the home buying journey. We know the road to homeownership is bound to bring many questions to mind, but rest assured because we will walk you step-by-step through the entire process.
What are the benefits of owning a home?
What should I consider before buying a home?
What is a Mortgage?
What components make up a Mortgage Payment?
What components affect my loan approval?
How do I determine how much I can borrow? Pre-Qualification?
What are some things that I need to do to prepare for buying a home?
What are the next steps in the homebuying process?
Building Your Equity. Each month you will make a Mortgage payment. The principal portion of the payment will go towards paying down on what you owe on your home. Your equity increases with every payment you make. Once you have fully paid off your Mortgage, you will have full equity or ownership in your home.
Investing in an Appreciating Asset. Appreciation is a term used to describe the value of an asset increasing overtime. A home is typically an appreciating asset. This means that overtime, your home has the potential of being worth more than when you first bought it.
Creating Tax Benefits. The interest you pay on your home, as well as your property taxes can typically be tax-deductible when filing your income taxes. Make sure to consult a tax advisor.
Building Your Credit. By paying your monthly Mortgage payment on time, you can build and enhance your credit.
Obtaining Ownership. Unlike renting, homeownership allows you to be in full control of your home. It will give you a sense of stability and permanence. You will have the flexibility of making home improvements when needed and will never have to deal with unexpected rent increases.
Visit our Rent vs. Buy Calculator to determine the difference between renting and owning a home.
Not only does homeownership come with great benefits, but it also comes with great responsibility. It is important to fully understand and to consider these new responsibilities before buying a home. Some include:
More Financial Responsibilities. When buying a home, you will be responsible for paying your monthly Mortgage payment, property taxes and homeowners insurance. In addition, you will need to pay your utilities, maintenance and repair costs.
Depreciation Risk. Typically, a home increases in value overtime, but in some cases, your home potentially could lose value overtime, meaning it is worth less than when you first bought it. As a potential homebuyer, you should be aware of this risk.
Less Flexibility. When renting, you have the ability to move easily and without much hassle. Yet, when owning a home, the moving process is a bit more complicated with the need of first selling your home.
A mortgage is a loan used for buying a house. The loan is referred to as a secured loan because the house acts as collateral in case of a default on the home loan. This means that if the buyer is unable to make their monthly mortgage payment, the lending institution has the authority to reclaim the house.
Components of a Mortgage that you should be aware of include:
Interest Rate. The interest rate is a percentage of your loan amount that the lender charges you to borrow the money to buy your home. Factors that determine your interest rate include:
- Current Market Conditions
- Credit Score
- Down Payment
- Type of Mortgage
Discount Points. Discount points are often misunderstood. Points are nothing other than interest paid at the time of closing to obtain a lower interest rate on a loan.
- One point is equivalent to 1% of the loan amount. For example, if you are going to borrow $300,000 on your loan, one point would equal $3,000.
- If you qualify, you can use your points to lower your interest rate, which will result in lower monthly mortgage payments.
- Discount points are optional.
Origination Charge. The origination charge is the amount the lending institution will charge for originating the loan. The origination charge includes:
- Document Preparation
- Underwriting Costs
- Other Expenses
Loan Term. The loan term is the amount of time to pay off your Mortgage. The loan term is determined by which Mortgage option you choose.
- A shorter loan term usually results in a higher monthly payment. Note that you will pay less in interest with a shorter loan term.
- A longer loan term usually results in a lower monthly payment. Note that you will pay more in interest with a longer loan term.
Visit our “Calculate a Mortgage Payment” Calculator to observe the difference between a short loan term and a longer loan term.
A mortgage payment is always composed of two elements:
- Principal. The principal is the amount of money you borrowed for the home.
- Interest. The interest is the cost of borrowing the money to buy your home.
A mortgage payment is sometimes composed of three other elements:
Property Taxes. Property taxes are taxes charged by the government. Depending on the lender, the lender may choose to collect a portion of these taxes in every mortgage payment. The lender will hold the tax funds in an escrow account. An escrow account is simply a holding account, typically by a third party. The lender will use these funds to pay your property taxes once it becomes due.
Homeowners Insurance. Homeowners insurance works just like property taxes. The lender may choose to collect a portion of this insurance in every mortgage payment and hold it in an escrow account. The lender will use the funds to pay your homeowners insurance once it becomes due.
Private Mortgage Insurance. Private Mortgage Insurance (PMI) is a required insurance for a buyer who puts less than 20% towards their down payment. The lending instituion requires this insurance to protect itself in case the buyer cannot pay their mortgage. As with property taxes and homeowners insurance, the lender sometimes collects funds for the insurance in every mortgage payment. The lender holds the funds in an escrow account and pays the insurance as it becomes due.
At Ameris Bank, we take the time to carefully consider each loan application submitted. Here are some components that we take into consideration when determining a loan approval:
Income. As a lender, we want to have full assurance that you can pay your monthly mortgage payment. Your income shows that you have a reliable, continuing source of funds.
Current Debt and Credit. Your current debt and credit history show your payment habits. Do you make your monthly payments? Do you pay these bills on time? These are the type of questions asked because they show the likelihood of you paying your monthly mortgage payment. Learn more about the Importance of a Credit Score.
Available Funds. As a lender, we want to be assured that you have additional funds available for paying the down payment and closing costs for your new home. Sometimes, a lender might also want you to have enough funds available for making the first couple of monthly mortgage, insurance, and tax payments.
The Property. Typically, you will be asked to provide a home appraisal of the house you would like to buy. The home appraisal shows the market value of the house, meaning if the house is worth the asking price of the home.
Before house hunting, it is a good idea to get prequalified for a loan. By doing this, you will have an estimation on the amount that you will be able to borrow.
Prequalification. Prequalification is a simply way of finding out a ball park estimate of how much a lender is willing to let you borrow. When getting prequalified, there are no costs or commitments on either side. Instead, it is just a simple inquiry to help you determine a price range for house hunting. By getting prequalified, you are able to narrow your housing options, focusing only on the ones you can afford.
Create a Financial Plan for Buying a Home. Homebuying is not cheap. Every penny counts!
Start Saving. When buying, you will have to pay the down payment and closing costs for the home. Start saving now. The more money you can initially put down on the home, the less you will pay in interest over time. Strive to pay at least 20% down on the home. By doing so, you will avoid having to pay Private Mortgage Insurance.
Understand the Importance of your Credit Score and History. Lenders put a high priority on checking your credit score and history. This shows them the likelihood of you paying your mortgage. Make sure your credit score is in good condition and that your credit history is accurate. If necessary, take the proper steps to improve your credit score – Credit Tips.
Determine How Much You Can Afford. Buying a home is not cheap, but it is possible if you plan ahead and understand how much you can afford. Create a budget to determine how much you can afford on monthly mortgage payments. Learn more about creating a budget.
Set a Time Frame of When You Would Like to Purchase Your Home. Set a date you wish to start the homebuying process. This date is simply a goal to keep you motivated towards achieving your dream. By no means is the date set in stone. If you are not ready to buy at your original date, then set another one for later in the future. The homebuying process should not be rushed, but instead, it should be a process that is highly prepared for.
Just as every home is different, the homebuying process is unique to each individual. Here are the typical steps in the homebuying process:
- Do Your Research. There is nothing more important than having the understanding and knowledge of what to expect during the homebuying journey. There is endless information, so guard yourself from becoming overwhelmed. Focus on the main topics and consult the professionals to teach you the rest.
- Consider Prequalification. Getting prequalified will allow you to get an estimate of how much a lender is willing to let you borrow. If you would like to get prequalified, contact one of the Ameris Bank Mortgage Bankers to get started.
- Find a Good Realtor. A realtor can make or break your homebuying experience. It is vital to find a realtor that you trust and enjoy being around. A good way to find a realtor is through recommendations from family, friends and colleagues. Don’t choose your realtor on a whim, but consider several realtors in order to compare their rates. Next, make sure your realtor understands your list of needs and wants. A good realtor will make sure all these factors are considered and find the best home to meet your needs.
- Go House Hunting. House hunting is the fun step of the process, but it can become very overwhelming as the options increase. A home is not usually selected overnight, and is typically identified after an extensive process that can take a great deal of time.
- Make an Offer. Once you have selected the home, it is time to make an offer. As the buyer, you and your realtor will put together a purchase offer to give to the seller. The purchase offer tells the seller:
- The amount you are willing to pay for the house
- The closing date you are requesting
- Other terms that need to be agreed upon by both parties
The purchase offer will also include an expirations date, which is the date that the offer becomes invalid. Typically, a seller does not accept the first offer a buyer puts on the table. Instead, the seller wants to negotiate the price and terms of the agreement. As the buyer, have a goal in mind of what you are willing to spend on the home. Work with your realtor to negotiate the price. To learn more, visit our tips on negotiating.
- Get the Home Inspected. Before making your purchase final, it is vital to have your home inspected by a qualified home inspector. The home inspector will make you aware of any problems in the home that you may have missed. Taking this precautionary step has the potential of saving you thousands of dollars on unexpected problems with the home.
- Apply for a Mortgage. Once the offer has been accepted, it is time for you to finalize your Mortgage. At Ameris Bank, we offer many Mortgage options to meet your needs. Visit our Mortgage Products page to learn about all the mortgage options we offer. To apply for a Mortgage loan, click APPLY NOW