TOWNSHIP OF WASHINGTON, N.J. -- As nationwide rent rates continue to climb, more and more financial professionals are encouraging young people to consider a purchase often thought of as one for later in life: buying a home.
The motivation for many first time buyers is simple: turn rent -- a burdensome monthly bill -- into a payment for something to one day call their own. "If you’re making a mortgage payment, you’re investing in your home," said Rose Kuchenmeister, residential loan manager at Oritani Bank. Rather than spending thousands of dollars annually living in a rental, saving funds and purchasing a home can actually save money in the long run. However, balancing a budget and knowing when to buy can be challenging for the uninitiated.
First, it's important for shoppers to understand their current financial health. "A first time home buyer needs to determine what the monthly payment will be on a loan, and see if they can afford that cost each month," said Kuchenmeister. "Buyers should put at least 5 percent down as a minimum, and going up to 20 percent can help eliminate other monthly expenses such as private mortgage insurance." However, the down payment and monthly mortgage bills aren't the only costs of owning a home.
"Utility costs will be higher than while renting, and homeowners insurance is also more expensive than renters coverage," said Kuchenmeister. It's also important to set aside cash reserves for unplanned repairs and expenses that pop up; a broken furnace or leaky pipe will no longer be covered by a landlord. To nip potential problems in the bud, Kuchenmeister recommends buyers perform a thorough home inspection with a certified inspector prior to signing any deal. "Sometimes you fall in love with a house but don’t know what’s going on behind the scenes," she said. Vetting a house before buying can save homeowners serious money in the long run.
As buyers begin the shopping process, Kuchenmeister recommends talking to their bank to ensure the necessary financial documents are in order. "You should obtain a copy of your credit report, clean up any delinquencies and pay off any monthly payments that may be outstanding," she said. "When applying for a loan, most banks will also ask for pay stubs, tax returns and bank statements, so it's a good idea to have these ready."
When ready to pull the trigger on the house of your dreams, local financial institutions such as Oritani Bank offer a variety of options to help finance the purchase. "Community banks will often give you more of that personal care and touch [than larger banks and brokers]," said Kuchenmeister. For instance, Oritani Bank is currently waiving all appraisal, credit report and flood determination fees on new loans, and is partnering with the Bergen County American Dream and Federal Home Bank’s First Home Club to offer down payment assistance to first time homebuyers.
For more information on lending programs available at Oritani Bank, click here.