So you’re ready to buy a house for the first time! It’s exciting, it’s groundbreaking, it’s a huge step forward…and it’s also a long, stressful process with a lot of opportunity for mistakes. We have five tips for a first time home buyer that should help you find your perfect home and mortgage. (*fun fact* mortgage translates literally to death pledge.)
1.) First things first, make a list that includes your absolute needs, your “really wants”, and your “won’t haves”. The priority of the list is completely up to you. Maybe having a double vanity in the master bathroom is more important to you than living in a neighborhood with low property taxes. There’s no right or wrong formula for what’s necessary for your home: it’s what is right for you! Once you’ve made the list, stick to it. A house with perfect hardwood floors is not going to make up for the long work commute that was on the top of your “won’t have” list.
2.) Organize your documents. This may seem like a no-brainer, or even a minor step in the home buying process. We’re here to tell you it’s an absolute must to get this done ahead of time. There’s hardly anything more stress inducing than choosing a home and applying for a mortgage and realizing that you have fifteen different documents you need to round up by the morning. Sheyna Steiner for bankrate.com warns that most mortgage lenders will require “two recent paystubs, the previous two years’ W-2s, tax returns and the last two months of bank statements — every page, even the blank ones.” Not only does doing this early save time, but it’s an essential step in preparing your budget, which just so happens to be our next tip.
3.) Find out how much you can spend. Rule of thumb says that you shouldn’t be spending more than 28% of your income on your mortgage. With all of your tax returns and spending documents already collected and organized, you should be able to get an accurate calculation of your income. Another good idea is to track your spending and your income for a few months. You’ll get a much better idea of your spending habits, specifically how much you’re used to spending on your living situation currently, and can use that to determine how much more or less you’d like to be spending on your future home. An app like Mint Bills will link to your bank account, making it especially easy to track your activity.
4.) Now that you have your budget, make sure you don’t forget about all the extra costs that come with a house. If you’re a first time homebuyer, odds are you’ve been renting, which has relatively low added costs compared to home owning. When making your budget, there are a lot of added one time costs as well as continuous charges. For starters, there are closing costs, usually a homeowners fee, extra insurance, property taxes…we can go on. Check out this website to get a full (and sometimes stress-inducing) list of the hidden costs for first time home buyers.
5.) Apply for a mortgage. This can be, and probably should be done before you’ve settled on which home you’d like to purchase. Being pre-approved for a mortgage before you put an offer on a home will help the chances of your offer being accepted in this competitive housing market. For your mortgage, there are a lot of options out there and it can seem overwhelming: a good place to start is by choosing between a credit union or a bank for your mortgage. Credit unions differ from banks in that they are a not-for-profit organization designed to help build up the community. This results in lower operating costs for them, and these savings may be passed on to you in your home loan. Credit unions will be more likely to offer low mortgage interest rates, lower closing costs, and a speedier closing due to their more personalized service. Check out this full article about choosing credit unions for home loans.
If you’re interested in finding out more about RMLEFCU mortgages, check out our website, or feel free to contact us for more information. RMLEFCU is offering incredibly low rates for first time home buyers with a low ½% origination fee, incredibly fast loan processing and no private mortgage insurance required!