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4 questions and tips for first time home buyers

4 questions and tips for first time home buyers

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Tired of paying rent? Ready to take the first steps toward homeownership? Buying your first home can seem overwhelming, but it doesn't have to be. Start here with a few tips and tricks for first-time home buyers so you are not caught by surprise.

How much do I really need for a down payment?

There are some mortgage options that allow you to get into your first home with a down payment as low as $1,000, but the average down payment is three to five percent of the cost of the home.

However, it is also important to consider some of the additional expenses that can come with home ownership. Have a little money set aside for repairs and emergency expenses before you make the leap. Consider costs associated with moving, utility bills, furniture and home maintenance as well.

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If you have never owned a home before, you might have a few first-time purchases to consider like a lawn mower, ladder or dining table. The more you are able to set aside for your down payment, the better chance you'll have at qualifying for a lower mortgage rate and reduced points on your loan, which will save you money over the life of the loan.

What steps do I need to take to get pre-approved?

Wondering how much of a house you can qualify for — then it's time to make an appointment with a loan officer. This is a very important step for first-time home buyers, even if the initial discussion is held via phone.

It is a good idea to check your credit history before the appointment with the three free credit reporting agencies (Experian, Equifax and TransUnion) at Make sure to review the credit report to ensure everything is accurate before applying for a home loan.

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You'll also need to be prepared with some documentation that speaks to your financial stability. When you speak with your loan officer, bring along copies of the following documents:

  • Most recent pay stubs (last 30 days)
  • Taxes and W2s (last 2 years)
  • Business taxes, if you are self-employed (last 2 years)
  • Bank statements (last 60 days)
  • Any retirement or other asset information (last 60 days)
  • And, although these may be touchy documents, divorce decrees and bankruptcy documents are also necessary, if they exist.

When should I plan on getting pre-approved for a loan?

It is best to get pre-approval BEFORE you shop for a home to avoid getting your heart set on a home that is not in your price range. If your credit is in good shape, getting prequalified 1-3 months in advance is sufficient. Credit scores between 660 and 725 will allow you to qualify for most mortgage loans, while higher credit scores will help you qualify for better mortgage rates and possibly lower fees.

A pre-approval is normally good for 30-90 days. If you are not ready to buy within that amount of time, that's okay, requalifying (including re-verification of information) can extend that window. If you are unsure of your credit or have credit issues, starting early is a must!

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How much of a house can I afford?

It is important to keep in mind that there is a difference between what you can qualify for and what you can comfortably afford. Before getting prequalified, review your budget, what you are currently paying for housing expenses and what you could feasibly pay monthly in a new mortgage payment.

Determine the payment amount that works so that you are only buying as much house as you are prepared to pay for monthly - then line that up with what you can qualify for!

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There are a number of different mortgage options that may fit your needs when getting into your first home. Talking with a loan officer will help you evaluate those options. A credit union home loan may be a good option for an individual just starting out who hasn't had the opportunity to build savings for a traditional 10 to 20 percent down payment.

So don't be overwhelmed by the process. Take a little time up front to plan and talk with a loan professional to identify an option that best meets your needs. Then you can seriously start thinking about kissing that rent check farewell and start down the path toward home ownership.

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