5 Tips for first‐time home buyers: The home buying season is right around the corner and could be here even earlier with the mild winter we’ve had. Buying your first home can be exciting, but also stressful. While making a purchase like this, it is helpful to know what needs to be done beforehand. Here are five tips to get you started so you can hit the ground running:
1 – Check your credit report and score. Before applying for a mortgage, check your credit report and fix any errors. You’ll also want to check your credit score, which is a direct reflection of consistent payment history, current income and amounts owed on additional accounts. Improving and knowing where your credit score stands could potentially save you thousands of dollars throughout this process by getting you a lower interest rate. To get a free copy of your credit report from the three major credit bureaus, visit www.annualcreditreport.com. While your reports are free, there might be a nominal charge to obtain your score.
2 – Get pre‐qualified and pre-approved. Understanding how much you can afford before you buy is important to a successful home buying experience. By becoming “prequalified,” you’ll first look at your overall financial situation and determine how much you can afford each month for your mortgage payment. From there, a mortgage representative can help you understand how much mortgage you could likely qualify for. Becoming “preapproved” requires more documentation information. While it is not a formal mortgage commitment, it does include loan terms and conditions that will help show sellers you’re a serious buyer.
3 – Learn about loans. Each type of mortgage is different, so it is best to know which type of loan works best for you. The most common are Fixed‐Rate or Adjustable‐Rate mortgages. With Fixed‐Rate mortgages, principal plus interest payments remain the same for the life of the loan. With Adjustable‐ Rate mortgages, the interest rates can fluctuate after an initial period, causing the total monthly payment to change periodically. Another option to consider when selecting a mortgage is the term or length of the mortgage loan. The most common term is for 30 years but many mortgage lenders also make mortgage terms for 15 or 20 years available too. With shorter term options, the borrower can expect to pay off their mortgage sooner (and own the home outright) but will typically have a higher monthly mortgage payment. Understanding the different mortgage options and working with an experienced mortgage representative to find the right mortgage option for your own situation will help you feel as comfortable with your mortgage choice as you do in your new home.
4 – Look for special programs. Some lenders offer programs that provide home buying assistance for qualified buyers. This can provide borrowers with grants or other incentives to make the home buying process more affordable. For borrowers who may not have the funds for a larger down payment and meet certain qualifications may find that an FHA (Federal Housing Administration) loan is the right option for them. The First Home Clubsm is a program sponsored by the Federal Home Loan Bank of New York, provides income eligible and approved participants who satisfy all conditions of the program a grant of up to $7,500 through a match of $4 for every $1 that is saved in a special savings account.
5 – Know your closing costs. Closing costs are charges and fees associated with closing of a real estate loan. These can range from 2‐6 percent of the purchase price of your home and can typically include loan processing fees, appraisal fees, credit report fees, mortgage insurance, hazard insurance, title insurance, recording fees, surveyor fees, and up‐front property taxes. Calculators are available to help you estimate these expenses up front to help you better budget for your closing.
Following simple steps like these will make the home buying process smoother and more enjoyable. For more tips and resources as you prepare to buy a home, just stop in any of our branches or visit us online at www.ESL.org.
Mary Blevins is the branch manager at the Batavia office of ESL Federal Credit Union. She oversees branch operations, including loan and shares, compliance policies and the management of branch personnel.