It can be overwhelming when you start considering becoming a first-time homebuyer, but there are a few steps to make the entire process a little easier. While these steps aren't a comprehensive list of everything you need to know and do to buy a home, they will help guide you as you take your first steps towards your goal of homeownership.
Determine how much house you can afford
When you start the journey to homeownership, it's important to understand how much you can afford to pay for a house. You can find calculators on bank and credit union websites to determine this amount, or you can do the math yourself. One rule of thumb is to keep your mortgage lower than 28% of your pre-tax income. For example, if you make $60,000 then your mortgage payment (plus insurance) should be at or below $1,400 per month. Don't forget you will need money for a down payment and other costs that might include:
- Closing costs
- HOA Fees
- Home improvement projects
- Taxes
- Insurance
Check Your Credit
Your credit score determines the type of loan you qualify for, the rate and other options. You can get a free credit report from AnnualCreditReport.com or you can get a free credit report from any of the three major credit reporting agencies: Experian, Trans Union and Equifax. Mid Minnesota Federal Credit Union (MMFCU) can help you
monitor your credit score while using online and mobile banking using SavvyMoney®.
Look into first-time home buyer programs
There are many first-time home buyer programs and homeownership assistance programs available through the federal and state government. Check with your mortgage lender about the options available to you. For example, at MMFCU we offer HomeReady Loans, VA Loans, FHA loans, and Rural Development Loan program options. Our expert Mortgage Loan Officers can help you determine what mortgage loan option is right for you.
Get preapproved
Pre-approval is extremely valuable because it allows you find out exactly how much you'll be able to borrow, and it positions you as a serious buyer. Some fast facts to know about pre-approval are:
- Pre-approval can be done before a home has been chosen.
- A lender will inform you if you've been approved for a specific loan amount.
- You must verify income and submit personal financial documents.
- Hard pull on a credit report is required, and a deeper dive into financial standing.
Once you are preapproved, your lender can provide you with more information about loan amount, possible interest rates and more.
Start searching
After you get preapproved and you have a clear idea of what you can borrow, it's time to start searching for your dream home. Keeping your budget in mind, think about both the type of house you want and the area you'd like to live in. Keep in mind additional costs associated with the type of home you are looking at. For example, if you are considering a townhome, there are often HOA fees that you'll have to pay each month on top of your mortgage. You might also want to consider neighborhood features like walkability, school districts, and property taxes.
Step into homeownership!
It's likely that you will want to find a real estate agent to help you find your dream home. Once you do, you will go through the last several steps of buying a home. This will include:
- Making an offer
- Getting a home inspection
- Getting a home appraisal
- Asking for repairs, if needed
- Completing a final walkthrough
- Closing on your first home
Your real estate agent and mortgage lender will help guide you through this process and be able to provide you with more accurate information as they navigate these final steps with you in the homebuying process. Buying a home can be one of the most challenging purchases you ever make. Make sure you select the right people to help you become a homeowner. If you have questions about the homebuying process or want to learn more about how Mid Minnesota Federal Credit Union can help you buy a home, click
here.
Mid Minnesota Federal Credit Union is an Equal Housing Lender.
