Tennessee First Time Home Buyer Tips
Thinking about purchasing a home for the first time can be scary, but if you have all the facts, you can be more prepared for one of the biggest investments in your life. Let’s go over some things to know when considering buying your first home in Tennessee.
How much do you need for a down payment?
If you are a first time home buyer, you can put as little as 3% down. That means, with an average home price of $300,000, putting 3% down would be $9,000. This is how much equity you would have in the home when you purchase it. The loan amount would be $291,000 financed for your mortgage over the term you select.
What is an Earnest Money Deposit?
This is something you provide as a deposit for your offer on the home and is typically 1-3% of the sale price of the home. This would be a check written and held in an escrow account by the title company until the loan closes. This deposit goes towards your down payment for the home. This can also be used to show the sellers how interested you are in the property so they will want to choose your offer over others.
What are closing costs?
Closing costs are the fees and escrow payments you need to pay for doing the loan. These fees include the lender’s fees for creating your loan, title fees, appraisal cost, and if you are going to escrow your taxes and insurance the cost to create the escrow account. Title fees include Owner’s Title insurance, closing fee, courier or recording fees, mobile notary fees if you are not signing at the title office and lender’s title insurance. Lender’s fees are loan origination, processing, and underwriting. Other costs are credit report fees, appraisal, mortgage insurance, and escrow funds.
How much are closing costs?
Closing costs can range and will depend on the sales price of your home, how much you are putting down, and if you are setting up an escrow account or not. They make up an average of 3-6% of the loan amount. Using the $300,000 purchase price and putting 3% down, your closing costs of 4.5% on a loan amount of $291,000 would be $13,095 plus your $9,000 down payment. That means the total you would need to bring to closing for this example would be around $22,000 minus your earnest money deposit.
What is an escrow account?
An escrow account is set up for you to have your property taxes and homeowner’s insurance collected with your monthly mortgage payment. Property taxes will range based off what county you live in and how much your property value is. This annual figure is then divided by 12 to add to your monthly mortgage payment. Insurance can also vary by coverage and if you have policy discounts, but the annual premium is then divided by 12 and added to your monthly mortgage payment.
Example- Taxes are $2,500 annually and Insurance is $2,000 annually- a total of $375/month would be added to your mortgage payment and paid out by the mortgage servicer.
For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.