Homebuying 101: Prepare Before You Shop
Summer is a popular time to buy a home, so if you find yourself scouring online home sites and mapping out your weekend around open houses, you are not alone! Jessie Hopkins, a Senior Mortgage Loan Officer at Workers Credit Union, has some first-time homebuyer tips on how to know if you are ready to buy a home. These steps will set you up for success before you start shopping.
- Determine the time that’s right for you. First-time homebuyers are people of all ages. When applying for a mortgage, approval often depends on the length of time you’ve had your job and having consistent income. It’s a good idea to wait to purchase a house until you have a steady lifestyle. Mortgage pre-approval is important and beneficial because it proves that you are able to afford the home. To get pre-approved, you will need to provide financial paperwork to your lender, and in turn, the lender will confirm that you are eligible for the loan. Having that pre-approval can be important in a competitive market and ensure a smoother homebuying process.
- Set yourself up for credit success. For a mortgage pre-approval, it is suggested that you have a credit score of 620 or above but being closer to 700 will get you better rate and product options. Keeping your total spending below 30% of your credit line will help to improve your credit score. These standards for first-time homebuying make it tricky for some. The Workers Credit Union Savings Secured Loans program helps members establish or rebuild their credit. The Workers Way™ Mortgage for First-Time Home Buyers is a loan designed to make buying a home a reality with relaxed credit score requirements, higher spending ratios, lower down payments, rate reduction and reduced closing costs.
- Save up for a down payment. Down payments are the out-of-pocket costs you pay when purchasing a home. A down payment is a percentage of the home’s purchase price plus closing costs, which are additional fees to consider. It can seem like a daunting amount of money, but by saving a set amount of each paycheck and waiting to shop for your home until you have enough saved, you will feel more financially prepared. This will also help you avoid the disappointment of finding your dream home too soon.
- Understand the costs and fees upfront. In addition to the down payment and closing costs, there are several expenses that come with the purchase of a house. Having this understanding will make you feel more comfortable in the long run. You may be able to afford a $1,300 monthly mortgage payment, but it’s important to keep in mind that there are other costs involved other than the principal and interest payments. These other costs can include property taxes, homeowners’ insurance and condominium HOA fees (if applicable). Private Mortgage Insurance is also required if you are unable to put 20% of the home price down as your down payment. Set your savings goals with consideration of all potential homebuying fees. No one wants a surprise fee.
Purchasing your first home is a big decision to make on your own. The first step is to reach out to a mortgage loan officer who can walk you through the process. They will help you to understand your own potential costs and give you guidance on whether you’re ready or not for this life milestone. If you are not fully ready, you may be referred to a Workers Way Financial Wellness coach to go over your finances and credit step by step to help prepare you to make your dream a reality as a future homeowner.
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