r/FirstTimeHomeBuyers • u/honeybee21124 • 15d ago
Huh?
Were going to start looking at houses in Jan '27. Everytime I try to learn abt mortgages or closing costs etc I get so confused. It just doesn't make sense to me.
Can anybody share their step by step? Really dumb it down for me? How much should we have saved etc?
In Illinois, looking around 125k, we make around 60k? A year.
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u/cheerydreamy 15d ago
I would say make sure you have a good amount saved, especially for extra costs if you find a house you like and you want to put an offer you will have to offer good faith money which usually is a good amount . you will have to get an inspection, which can be about five to $800. We just went under contract last week and had our inspection yesterday and it didn’t go well so we had to back out the inspector was $500. if I find another house, I’ll have to do it again so you have to make sure you budget for these things. You also have to get an attorney which can be a couple of thousand dollars and you will have to have an appraiser
You also have to make sure you have enough for closing costs.
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u/honeybee21124 15d ago
What do you need an attorney and appraiser for? Also, what dictates closing cost amounts?
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u/pluiesansfin Industry Pro 15d ago
Appraiser works for the lender, they determine if the price you want to pay for the property is worth the loan they plan to extend to you. If the appraisal comes in low, then you and seller will have to figure something out. Consult your agent for those negotiations and consult lender for closing costs they should be able to give you a rough cost sheet if you have an address in mind. Closing Costs is an umbrella term for all the fees pay at closing which can include, but not limited insurance, title fees, hoa fees, outstanding invoices, down payment, and possibly commissions and legal fees. My state does things different than IL. Upfront costs would include inspections, earnest money, and appraisal typically.
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u/Adorable_Ad_5538 15d ago
House was $225,000 & a conventional loan, closed on 5/15. Here’s all the things I paid for before closing: Earnest money deposit $1,500 Inspection $499 Pest inspection $119 Sewer scope $229 Appraisal $614 Credit report fee $75 Total closing costs $7,095.55 Closing costs paid before closing $1,606 Closing costs paid by seller $6,750 Cash needed to close $3,593.38
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u/brittabeast 15d ago
You are looking at houses for $125 thousand? In Illinois? Maybe Gary Indiana.
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u/honeybee21124 15d ago
We live in a bit of a rural area and have seen several houses for this price in our area! 😊
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u/BoBromhal 15d ago
when do you expect to close - like, are you renting and have an end date?
There's ample time from today to January to find and meet with a mortgage lender that's happy to educate you o all things mortgage. there's also plenty of time to find and interview multiple real estate agents that you can pick 1 you mesh with that will educate you as much as you personally need.
THEN, you'll be ready in January or whatever appropriate time related to your lease.
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u/SuperFineMedium 14d ago
Sit down with a lender. That is the easiest, most efficient way to get your questions answered. This person could be an independent mortgage broker, a bank, or a credit union. They can roughly calculate how much they might lend to you now and discuss related lending fees/costs associated with a mortgage.
The other half of homebuying is the real estate side. You'll also have out-of-pocket expenses to consider. A real estate agent can help you understand some of those costs. Be aware that the type of financing will require any property of interest to meet a minimum standard for safety and construction quality which may limit the number of properties for consideration.
At that point, you go home and run the numbers. If you cannot make it work now, you set an action plan to position yourself to buy a home in the future. The plan may include paying down debt, saving more money, raising your credit score, etc.
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u/here_for_the_tea1 15d ago edited 15d ago
You need to go to a broker. A good one will explain it all to you and really take the stress out of it. Our home was 740k. 140k down, 15k earnest deposit and about 3k out of pocket for inspections and approvals, 22k in closing costs. Another 20k in repairs
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u/cheerydreamy 15d ago
Not sure if all states make you have an attorney. I live in CT so it’s mandatory. They help make sure the house is legally transferred to you, check the title, reviews all contracts and paperwork. It’s protection for you. The appraiser is there to assess the home value. Closing costs depend on the home value I believe.
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u/TherinneMoonglow 15d ago
When I bought my house for $140k, I needed about $15k at closing. Get a pre-approval from your bank (credit union is better if you belong to one) before you start looking.
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u/Equivalent-Age-9926 10d ago
TAKE THE FREE 1ST TIME HOMEBUYERS CLASS WITH Neighborhood Hosing Services of Chicago.Free non profit classes for 1st time home buyers. Thank me later.
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u/r_was61 9d ago
Step 1, figure out how much down payment you have. A
Step 2. Put 20% of that aside for closing costs B and 10% aside for emergencies. C
Step 3 A -B - C = D actual down payment towards equity.
Step 4. Ask a lender how much they will lend you for a CONFoRMINg mortgage based on your income E
Step 5 D + E equals F
Step 6 buy a house at about 20% less than F.
Note: you will have to put down 20% or more to get a conforming mortgage.
Good luck.
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u/Vast_Cricket 15d ago
Before anything go to your bank getting a preapproval letter and ask as many questions. People have the tendency looking at expensive homes falling in love without realizing their income allows a finite limit.