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First-time homebuyers guide for Indiana

Want to know how you can make the American dream of homeownership come true for your family? In this Indiana homebuyers guide, we break down the financial considerations and steps in the process from house hunting to closing day.

At First Bank, we know that the Hoosier state is a wonderful place to call home. From the Indiana State Parks network to our state school districts, there are many resources to attract individuals and families. When you’re ready to start the mortgage application process, our knowledgeable mortgage team is here to make great things happen for you!

How much house can you afford?

The median home price in Indiana is $142,600, according to BestPlaces.net. Here in Southwest Indiana, median prices are lower than the state average:

The median home price in Indiana is $142,600

The down payment

First, you will need to calculate costs and other factors to consider before buying a home. That will determine what type of home loan you select and the maximum amount you can borrow.

First, you will need to calculate costs and other factors to consider before buying a home.

  • Conventional mortgage: Aim to put at least 20 percent down. A smaller down payment means you’ll need to pay Private Mortgage Insurance (PMI) premiums each month until you have 20 percent equity in your home.
  • FHA mortgage: Insured by the Federal Housing Agency, these home loans allow down payments as low as 3.5 percent, but you’ll pay mortgage insurance for the life of the loan.
  • VA mortgage: Available to qualified service members and veterans, VA loans are one of the few mortgage options that allow up to 100 percent financing (meaning no down payment) without mortgage insurance.
  • USDA mortgage: This is another no-down-payment option for homes in eligible rural and suburban areas.

Now that you understand the range of potential down payments, consider how much you already have saved for a down payment. Are you ready to put 20 percent down or do you need more time to grow your savings?

Pre-approval letters

Many real estate agents will ask for a pre-approval letter before they start showing you properties. This document comes from your lender and provides an estimate (not a promise) of the maximum amount they’re willing to loan you. Pre-approval letters can help you figure out how much home you can afford, though you may want to borrow less than the maximum.

Pre-approval letters can help you figure out how much home you can afford

Your monthly mortgage payment

Once you have your down payment in hand and a price range in mind, you can start estimating your monthly mortgage payment. Use our monthly budget calculator to test out different combinations of loan amounts, interest rates, and loan terms. Remember to account for property taxes and home insurance premiums, which are usually paid through the monthly mortgage payment as well.

Budgeting for buying a home

In addition to a down payment, there are two other primary costs associated with buying a home.

Home inspection

While this is an optional expense, it’s one you don’t want to skip. A professional home inspector will provide a detailed report on the condition of your prospective home, from the roof to the furnace in the basement. You may be able to use the inspection report to negotiate a lower price, seller’s assist, or pre-closing repair.

The national average price for a home inspection is around $300. You can shop around by getting quotes from a few different companies. The total cost will depend on the size of the home and location.

A professional home inspector will provide a detailed report on the condition of your prospective home

Closing costs

When you close on your home, you’ll need to bring a cashier’s check for the costs associated with the transaction. If the costs are over $10,000, the state of Indiana requires that the funds be wired. Your lender will provide a final summary a few days before the scheduled closing, but you can estimate that closing costs will total about 1-2 percent of the sales price. This includes:

  • Lender Fees
  • Title Fees
  • Other prepaid costs

you can estimate that closing costs will total about 1-2 percent of the sales price

Ongoing homeowner expenses

Buying a home is likely the biggest purchase you’ll ever make. After saving a down payment and closing costs, and holding the keys to your house in your hand for the first time, you still need to save for ongoing and future expenses. Here’s what to expect:

  • Utilities: If you’re moving into a larger space, you can expect to see an increase in your utility bill, especially in the dead of winter and summer, when your heater or air conditioner is doing the most work.
  • Appliances: Hopefully you won’t need to replace anything right away, but eventually the hot water heater will start to leak or the refrigerator will stop keeping food cold. Instead of using debt, you can start saving for these inevitable future purchases now.
  • Yard maintenace: Do you plan to mow and trim your own lawn and hedges, or will you pay someone else to do it? What about the gutters? There are also one-off expenses to save for, such as tree removal or stump grinding.
  • Essential repairs: From calling the plumber to replacing broken screens, there are a variety of small-large-repair jobs that arise over time. You may be able to do some of them yourself, but it’s a good idea to set aside a little repair money just in case.
  • Decorating and renovations: Perhaps the most fun aspect of being a homeowner is putting your own stamp on your new space. From choosing paint colors to buying new furniture, there’s plenty to spend money on. Try to pace yourself by setting a monthly allotment according to your budget and sticking to it.

First Bank makes Great Things Happen for Indiana homebuyers

Our Indiana-based Mortgage Loan Specialists are here to make your home buying experience as smooth as possible. With all of their knowledge and experience in the Indiana real estate market, they are an excellent resource. Don’t hesitate to ask for help in determining what you can afford before you start house-hunting. Visit our Mortgage Loans page to learn more, speak with a lender, or apply now.

Don't hesitate to ask for help in determining what you can afford before you start house-hunting

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