Is now the right time to buy your first home? Interest rates remain low and most analysts expect the Federal Reserve will leave rates unchanged through 2020.
While the process of finding and buying a home is exciting, it can also be overwhelming if you’re not prepared. Consider these factors as you start your journey to homeownership.
YOUR "HOMEWORK" ASSIGNMENTS
Whether you’re looking for an existing or brand-new home or land to build on, you’ll most likely need to apply for a mortgage loan. Here are some things you can do to improve your chances of being approved:
- Know your credit score – Most lenders have minimum credit score requirements.
- Stay at your job – Even if you’ve been pre-approved, lenders verify employment just before closing on your home.
- Minimize your debt – Pay down current debt and avoid obtaining new debt to lower your debt-to-income ratio.
- Save your cash – You’ll need money for a down payment, homeowner’s insurance, inspections and closing costs.
UNDERSTAND YOUR LOAN OPTIONS
When it comes to choosing a mortgage loan, you have options. Learn about TCU’s Mortgage Loan options here.
Fixed-rate mortgages — 15-year or 30-year — are the simplest and most popular home loans, and they prevent the surprises that can come with adjustable-rate mortgages, where your interest rate is subject to increase. A shorter payback period saves you money on interest, but your monthly payment will be higher. TCU’s 15-year vs. 30-year mortgage calculator will generate the amount you can expect to pay with both types of fixed-rate loans.
Once you’ve decided what type of mortgage is best for you, you'll want to see the full impact of your monthly payment on your household budget. TCU’s PITI calculator — PITI stands for Principal, Interest, Taxes and Insurance — will show how much of your payment goes toward interest, and how much toward principal.
Once you have a better understanding of what makes up a monthly mortgage payment, you’ll have a realistic idea of how much house you can afford. Now it’s time to connect with a TCU Mortgage Professional who can guide you through the lending process from start to finish, keeping the activity running smoothly through closing day. Find a TCU Mortgage Originator or apply for a mortgage online at tcunet.mortgagewebcenter.com.
HAPPY HOUSE HUNTING
Now to the fun part — finding the perfect home! After you’ve done your homework and gotten pre-qualified, you’ll know your budget, and any sellers you negotiate with can rest assured that your loan application should go through without any issues.
As you enter this step of the process, check out resources in TCU’s Financial Empowerment Guide on Buying a Home. Find out how to contact a real estate agent or broker, different avenues for shopping homes, best practices for when you start to tour and evaluate properties and guidance for when you’re ready to make an offer.
Emotions — both excitement and stress — can run high during the homebuying process, which is why it’s best to take a deliberate approach that helps you determine the best options for you in purchasing a home.