Daphne Hawk is the superintendent of the Ohio Department of Commerce Division of Real Estate and Professional Licensing.
Buying a home is a significant financial decision. In recognition of National Financial Awareness Day, here are some tips to stay financially aware and help you navigate the home-buying process in Ohio.
- Create a Realistic Budget: Before diving into the home-buying process, assess your finances. Determine how much you can afford as a down payment, monthly mortgage payments, property taxes, insurance, and other related expenses. Make sure your budget aligns with your long-term financial goals and the estimated mortgage payment is an amount with which you are comfortable.
- Check Your Credit Score: Your credit score plays a significant role in the mortgage approval process and the interest rate you receive. Aim to improve your credit score before applying for a home loan by paying off debts and correcting any errors on your credit report. Several apps now offer specific steps you can take to raise your score. These steps can sometimes take two to three months to be reflected, so start monitoring your credit score a year before entering the home mortgage process.
- Explore Loan Options: Research different types of mortgages available in Ohio, such as fixed-rate mortgages, adjustable-rate mortgages, FHA loans, or VA loans. Compare interest rates, terms, and fees to find the best loan option that fits your financial situation.
- Save for a Down Payment: While some loans offer low down payment options, having a larger down payment can lower your monthly mortgage payments and potentially eliminate the need for private mortgage insurance (PMI). Start saving early to build a substantial down payment.
- Consider Down Payment Assistance Programs that may be available to you through agencies like the Ohio Housing Finance Agency (OHFA).OHFA can provide up to 5% down payment assistance for first-time homebuyers. Learn more about their programs at myohiohome.org.
- Factor in Closing Costs and Earnest Money Deposit: In addition to the down payment, be prepared for closing costs, which typically range from 2% to 5% of the home's purchase price. Most purchase offers include an earnest money deposit clause. This is to indicate your earnestness in making the offer. It will be refunded to you at closing. Include these costs in your budget to avoid any last-minute financial surprises. In addition, you may need to pay all or a portion of your buyer agent's fee – check out this resource from the National Association of Realtors for more details.
- Get Pre-approved for a Mortgage: Before house hunting, obtain a pre-approval letter from a lender. This shows sellers that you are a serious buyer and can help you move quickly when you find the right home.
- Consider Homeownership Expenses: Beyond the initial purchase, factor in ongoing homeownership expenses like maintenance, repairs, utilities, and HOA fees. Be sure to include these costs in your monthly budget to ensure financial stability. Having a three–six-month emergency fund is wise in case you become unemployed or have some other financial emergency like the need to purchase a new furnace.
- Attend Homebuyer Education Programs: Many resources and workshops are available in Ohio to educate first-time homebuyers about the process, financial responsibilities, and available assistance programs. Take advantage of these programs to make informed decisions. Some lenders may require it for first-time homebuyers in order to qualify for a loan.
This crucial financial advice can help you achieve homeownership goals. The Ohio Department of Commerce Division of Real Estate and Professional Licensing is committed to protecting the consumer as we are responsible for the regulation of Ohio's real estate brokers and salespeople, appraisers, home inspectors, and other professionals within the real estate industry. For more information, please visit com.ohio.gov/real.
