Buying a home can be a confusing and complicated process –especially if it’s your first time. If you are planning on purchasing your first home this year–congratulations! We are so excited you’re tackling this important milestone. Before you rush into the process, we’d like to give you a few words of wisdom. After all, the more informed your decision is, the better you’ll feel about it in the long run.
Here are our RMLEFCU-approved tips we believe every homebuyer should know:
Make Sure Your Credit Report Is in Excellent Shape
When evaluating your application for a mortgage, lenders aren’t just putting your credit score into consideration. They go through each nook and cranny of your credit report to evaluate your payment habits, balances, and overall financial health.
It’s a new year, so new financial habits should be at the forefront of your mind. If you don’t do so already, now is a perfect time to set a personal goal of reviewing your credit report regularly. That way, you can adjust your spending habits accordingly as well as spot errors on your report. RMLEFCU’s SavvyMoney is a great tool to use for this.
The Earlier You Start Saving, the Better
If you don’t have a healthy amount of money saved up already, now is the time to get started. The pandemic has shifted a lot of things, including how long it takes to save up for a down payment on a home. In fact, saving for a home is taking average Americans 10 months longer today than it did before the pandemic—all together, economists assert that it will take about 7 years and 11 months to save up for a 20% down payment on a medium-priced home.
We know this sounds overwhelming, but with the right plan in place, it’s very possible to achieve. We recommend setting up a high-yield savings account just for your home buying costs as well as setting up a strict budget.
Explore Your Mortgage Loan Options
If you’re eager to start looking for a home now but are only able to afford a small down payment, don’t panic—you still have options to make your home buying dreams come to fruition. FHA loans, USDA loans, and VA loans can be helpful resources in this situation. Better yet, our RMLEFCU First-Time Mortgage Loan is one that allows you to get your home AND maintain a solid financial foundation:
As little as 5% down required
Only a 1/2% origination fee
Zero PMI (Private Mortgage Insurance)
Impressively low rates that start at 2.74% APR .
Don't Forget to Save for Closing Costs
The bill for closing costs is the final hurdle between home buyers and their new homes, and it is a surprising chunk of money. Closing fees run between 3% and 6% of the mortgage; that’s around $9,000 to $18,000 on a $300,000 home.
These fees pay for important steps in the home-buying process, including:
Get Pre-approved for a Loan Before House Hunting
Once you’re confident you have enough cash saved to pay for closing costs and 10–20% of your home, you’re ready to handle the rest by talking to a mortgage lender.
Get prequalified for a loan and take the extra time to get a preapproval letter before you start your home search. Preapproval shows sellers that you’re a serious buyer, which is a great way for first-time home buyers to get ahead in a competitive market.
To get preapproved, your lender will need to verify your financial information (proof of income, taxes, etc.) and submit your loan for preliminary underwriting.
A Good Real Estate Agent Is a Must
While it’s entirely possible to buy a home solo, it may not be the smartest move — at least your first time around. An experienced real estate agent can help you vet neighborhoods and homes, schedule tours, negotiate, draw up contracts, and more. They’re experts when it comes to this intricate process, and they could be just the person you need to find your dream home at your dream price point.
Ask your friends, family members, and colleagues for agent recommendations in your area, and don’t forget to interview at least a few. You want to make sure they’re a good fit and are willing to put your real estate needs first before deciding to work together.
Ready to Buy Your First Home?
RMLEFCU understands that buying your first home is one of the biggest (if not the biggest!) investment you’ll make in your life. We’re here to help ease the process in any way we can–if you are interested in learning more about our First Time Homeowner’s Mortgage Loan or any of our other lending options, don’t hesitate to send us an email at firstname.lastname@example.org or give us a call at 303-458-6660.