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Buying a home is one of the largest investments that most people will make in their lifetime. It is an exciting experience, especially if you have experts to help you along the way. Whether you’re new to the home buying process, or you’ve purchased a home before, it’s helpful to start by asking yourself a few simple questions and First Farmers & Merchants is here to help you with the answers.

Is buying a home the right choice now?

Even if you could afford to buy any house you want, first ask yourself, "Is this the right time?" Consider your short- and long-term personal goals. Are you financially ready, do you have a stable job? There’s a lot to think about, but we’ll make sure it’s not overwhelming.

In addition to monthly mortgage payments, your future property taxes and insurance need to be considered part of your current household budget. This will allow you to decide how much loan, and home, you can afford. You’ll avoid sticker shock by focusing your search within a specific price range.

What type of home will make me most happy?

You know what you like. You know what you need. So before you start looking at homes, take time to make a list. Write down the things you like to do inside, and outside in the yard. Think about the style and construction of the home you want, the floor plan, the number of rooms, even size of the garage. Your list will come in handy searching for homes online and help your realtor show you homes that make the best match.

Don’t worry. We’re here to help.

Please don’t be shy. Reach out to a First Farmers & Merchants loan officer in your area. We’ll walk you through the entire process. We’ll make sure you you’re informed every step of the way.

Mortgage Loan Process

How do I know what to budget?

When buying a home, it’s critical that you have a clear understanding of the budget you can manage, and your overall financial situation.

• How much down payment can you afford?
  
• What’s your income-to-debt ratio?
  
• What’s your credit score?
  
• What’s my monthly payment?
  

 Every mortgage payment is part Principal, Interest, and Taxes and Insurance if you choose to escrow. Also known as PITI.

 Principal is the initial amount you borrow, then the remaining balance throughout the life of the loan.

• Interest is the fee you pay to borrow the money.
  
• Taxes and the rate you pay are set by your local government.
  
• Insurance on your home and property is required if you have a mortgage. Rates are set by the insurance provider.
  

Many homeowners choose to have their taxes and insurance payments made using an escrow account. This allows them to avoid one large tax payment at the end of the year, and worrying about multiple insurance payments throughout the year. If you choose to escrow, these required homeowner expenses are spread out and collected in small amounts as part of your monthly mortgage payments, and placed into an escrow account. Your lender then has the responsibility to make these payments using your money in the account.

How does the interest rate affect my payment?

In addition to the length of your loan, your interest rate is a key part of determining your monthly payment. A high rate means higher payments. You need to ask yourself these questions to help you get the lowest possible rate:

• Do you want a fixed or adjustable rate?
  
• Would you prefer a short- or long-term loan?
  
• Will you pay discount points?
  

 Mortgage Pre-qualification

What does pre-qualified mean?

Pre-qualification starts the application process. The lender checks your credit, ability to pay, and you learn how big and what type of loan you qualify for. It takes a little time, so you should get pre-qualified before you start looking for homes.

• You’ll know what price range you can afford
  
• You’ll be able to make an offer as soon as you find a home you like.
  
• You’ll identify potential credit or other problems early.
  
• You’ll have more negotiating power because sellers will know you’re ready to buy.
  
• If you’re self-employed or work on commission, pre-qualification shows you have financial backing.
  
• It gives sellers confidence to work with you if you’re a first-time homebuyer.
  
• Best of all, First Farmers & Merchants offers pre-qualification at no cost.

Finding Your Home

When you’re ready to start searching for homes, make a list of the features you want. Decide what part of town you want to live in. Pay attention to what you want, compared to what you need. If you work with a REALTOR® this will help them narrow the search to find homes for you to look at quicker.

What type of neighborhood feels right?

The right neighborhood is as important as the right house. When choosing a neighborhood, be sure to consider:

• Travel time and distance to work
  
• Is it close to areas of town important to you and your family?
  
• If you have children, is it in a good school district?
  
• Does the neighborhood offer the amenities important to you like shopping, recreation and other services?
  
• Are the other houses clean and well maintained?
  
• What type of home do I want to live in?
  
• Are you looking for a single-family home, a condominium or a townhouse?

Even these very different types of homes will have wide variety of options when it comes to space and design. Maintenance requirements are also different depending on a home’s age and style.

What features are most important me and my family?

Things like paint or new carpet are easily changed before or after you move in. Look for features that are already part of the home’s construction and design. Think about:

• Would you like a two-story or single story home?
  
• How many bedrooms will you need today, and in the future?
  
• What’s the fewest number of bathrooms you can’t live without?
  
• Do you need a home office, does it matter where it’s located?
  
• What’s more important, a backyard for running around, or a small outdoor area to relax?

Making an Offer on a Home

I’ve found the perfect home. Now what?

Extending an Offer.

When you’re ready to make an offer and purchase your home, expect some negotiations until you reach a final price the seller is willing to accept. It’s a good idea to work with a REALTOR® to conduct the negotiations, be your advocate and serve as a trusted advisor. When you extend your offer:

• Make sure the seller knows you’re pre-qualified, which will make your offer more attractive.
  
• Make sure ALL negotiations are in writing and that you receive copies.
  
• You'll need to make an earnest money deposit. Typically 1-2% of purchase price, and varies by state. This deposit shows the seller your offers is serious and made in good faith. It’s given to the escrow company and will be applied to the final purchase price at closing.
  

Pre-Closing.

When the seller accepts your offer, here’s what’s next:

• Review the loan commitment, make sure you understand the loan's rate terms, requirements and details.
  
• Have the home inspected by a certified home inspector.
  
• Obtain homeowner’s and any other required insurance.
  
• Verify with the closing agent or attorney that a property survey was ordered.
  
• Set a closing date and time.
  
• Start preparing to move.
  
• Confirm that you have met all the guidelines and conditions in the purchase agreement established by the seller (see below).
  
• Be prepared to pay final closing costs at your closing appointment.

Remember, your First Farmers & Merchants Loan Officer will answer your questions, stay involved and guide you through the process all the way to closing.

The Purchase Agreement.

At this point, money has officially changed hands. You’re almost done. Now the purchase agreement has to be finalized. This is legal contract between you and the seller of the property. It outlines all terms and features of the final transaction, including:

• Property address and legal description.
  
• Sales price and the loan, down payment and deposit amounts.
  
• Names of all parties involved including the buyer, seller, buyer's agent, seller's agent, mortgage broker/banker and any attorneys.
  
• Time limits that might apply to the transaction.
  
• Any contingencies that must be addressed prior to the deal being completed and finalized (such as the sale of the buyer's present home, issues from the home inspection that might need to be repaired, etc.).

Every home transaction is different, so not all contracts are the same. Turn to your realtor, title company or an attorney to help you through the negotiations and execution of a purchase contract.