Your home is likely to be the biggest purchase you make and potentially your largest ongoing expense. Because of this, it’s important to make sure you are prepared financially.
RUN THE NUMBERS
The market might be in a good position for buying, but if your finances aren’t yet ready to take on the expense of a home, you need to make a plan to get there. Remember that when you buy a house, you’re not only going to be making your mortgage payment; you’ll be responsible for taxes, insurance and upkeep as well.
If you buy at the maximum of what your budget allows, you’ll find yourself strapped at the end of the month and vulnerable to falling behind should an emergency hit. By ensuring you have extra cash on hand, you’ll be able to start an emergency savings account to cover any unforeseen expenses. There are many free calculators out there, including those at ConsumersCU.org, that can help you decide what you can afford.
REVIEW YOUR CREDIT REPORT
If it’s been awhile since you last checked your credit report, you will want to make sure all of the information is accurate prior to applying for a mortgage. You are entitled to a copy from each of the three major credit bureaus each year at no charge, which you can request from AnnualCreditReport.com. (The report will be valid for 120 days with the median number used for your pre-approval.)
I recommend pulling your credit about 30-45 days prior to the beginning of your home search, which gives you a little time to remedy anything that comes up. The ideal credit score varies for each loan type. The lowest interest rates are made available to those with a credit score of 740 and above, although you can still get favorable financing between 660-740. The lowest typical score for financing is 620.
DECIDE ON YOUR DOWN PAYMENT
For those looking for a primary residence, littleto-no down payment loans are available. Many strive for a goal of 20% down because it will offer you several advantages (i.e., no private mortgage insurance, or PMI, and the ability to pay your taxes and insurance separate from your payment); however, with interest rates at historic lows, it’s rare that purchasers can save enough fast enough to make a difference in their monthly payment. Be sure to discuss your goals with your lender. Just know many great options are available!
GET YOUR PRE-APPROVAL
At Consumers, we offer the most common and traditional loan programs—including conventional, FHA, and VA, new construction and refinancing—and a few unique programs like 0% Down, No PMI and specialty loans for those in the medical and service fields.
All applications at Consumers start by getting a pre-approval using our #FastApp Mortgage application, which allows you to view your loan’s progress 24/7, securely upload documents and message your loan officer easily as you go.
Typical documentation needed ahead of time include recent paystubs, past W2s, bank statements and statements for other assets including any retirement accounts. Your lender will provide you with all the specifics.
HAPPY TO HELP!
Never be afraid to reach out and lean on your homebuying team—your lender, realtor and other experienced buyers. There is so much to know about the purchase process, that I bet my homebuyers literally ask a hundred or more questions throughout. And that’s okay. It’s important to me they are confident during the process and knowledgeable of what is expected in order to be successful.
THE HOME BUYING PROCESS
- DETERMINE YOUR BUDGET AND FINANCING OPTIONS WITH A PREAPPROVAL, which will help identify which loan type is best for you and guide your realtor in helping properly negotiate the structure of your offer. Pre-approvals may require additional time depending on your unique situation, so don’t delay.
- START YOUR HOME SEARCH! Work with a realtor to view homes and submit your offer. This will begin the negotiation process and determine the terms of your purchase such as price, closing details and other contractual obligations.
- COMPLETE THE FORMAL APPLICATION PROCESS. This typically involves signing a loan application and other disclosures, submitting more documentation if necessary and paying an appraisal fee.
- While the application is processed, several different things take place: THE APPRAISAL, INSPECTIONS, PROCESSING, TITLE WORK AND UNDERWRITING. You will be informed of your progress every step of the way and notified if further documentation is needed to support your application. Once underwriting is complete, you’ll be issued a Final Approval, which allows your formal closing to be scheduled!
- THE CLOSING is the final event in the process, in which all parties sign formal documentation that transfers ownership and funds in exchange for the keys to your new home!