3 Things to Do Before Applying for a Home Loan

3 Things to Do Before Applying for a Home Loan

For most, buying a home is a one-time (maybe two-time) purchase. Typically, your first home is labeled the “Starter Home”; the one that will expose you to the truth of what it means to own a home. The second home, might be your “Forever Home”. Either way, it’s not a journey you’ll take often. And the process can feel overwhelming if you haven’t done your homework.

 Check out these three things to do before getting pre-qualified for a home loan.

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Check Your Credit Score

Credit scores are one of the first items a lender will consider when an individual or partners submit a home loan application.  Before speaking with a lender, it’s important to know what they’ll be reviewing. 

  • Timely payments

  • If there are current delinquencies-6 month timeframe

  • Debt-to-income ratio

  • FICO credit score

Learn more about your credit score and receive your free annual credit report.

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Know Your Monthly Income and Debts

Write down all income sources and any debts that go out monthly.  If your debt to income ratio is more than 43%, it can be considered “risky borrowing” depending on the type of debt.

To better understand how much purchasing a home could change the income vs. debt scale, look at any rental and/or transportation current costs.  Moving closer to work may cut down on transportation costs, allowing for some room in what you’re willing to spend on a home.

Not sure what the reasonable monthly mortgage payment should be in your state?  HUD guidelines state that mortgage payments should not exceed more than 28% of your pre-taxed income.  This creates a standard for fair market pricing based on a family’s median income.

Use our purchase calculators to see how much home you can afford and if you pre-qualify.

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 Save for the Down Payment and Closing Costs

There are a lot of different expenses that a first-time home buyer will experience.  The two most common are the down payment and closing costs.  Programs are available to as little as 3% down on home loans.

Down Payment:  Money given to the home’s seller, expressed in percentages, to ensure a financial interest in the home. 

Closing Costs:  Fees and expenses that are paid to the companies and individuals involved that assist in securing the mortgage.  This can include:

  • Lender's origination fee

  • Deposit verification fees

  • Attorney's fees

  • The appraisal fee and any inspection fees

  • Cost of title insurance and title examination

  • Property survey

  • Credit reports (actual costs)

  • Transfer stamps, recording fees, and taxes

Be Prepared for the House Hunting Experience

Questions about homeownership?  Our mortgage loan officers are here for you.  

Louise and Dora: Credit Union Pioneers

Louise and Dora: Credit Union Pioneers

Saving More with America Saves Week

Saving More with America Saves Week