Making the transition from renter to homeowner is a milestone, and one of the biggest financial decisions you will ever make.
Kim Moore, Director of Mortgage Services at Mountain America Credit Union, joined us with some advice on how to get started.
She says ideally you'll want to start the process well in advance. One thing you'll want to do is clearly identify what you want out of your home.
Is there a particular geographic area you want to live in? Do you want more of a downtown or suburban lifestyle? How many rooms or square feet do you want? What are your must-have features and what are the nice-to-haves?
For instance, you may be someone who loves to have friends over for a summer barbecue in the backyard, but you don't entertain as much in the winter. In that case, a great backyard may take precedence over a larger indoor dining space.
After you have a list of things you're looking for in a home, Kim says says she recommends having an initial call with a mortgage loan officer who can help you better understand the homebuying process and what you may need to do before you get started.
One of those is what type of loans you may qualify for. Kim says there are many different mortgage options, including loan programs specifically for first-time homebuyers that might be attractive for you. But you'll want to understand the terms of these programs compared with other mortgages to find the right one for you.
While the loan officer may not actually pull your credit score, they can talk through your personal situation and present the mortgage options that may be the best fit. They can also give you advice on things you could do to improve your credit score and increase your likelihood of qualifying for better terms, such as a lower interest rate or a higher loan amount.
Something often misunderstood is that there are a variety of models used to generate a credit score. A free online credit score isn't necessarily going to match the number that a mortgage lender will show. It's important to know in advance if you need to work on increasing your credit score. A loan officer can advise on the most effective approach to do this.
The next thing to do is determine how much house you can really afford. You can find mortgage calculators online, including at macu.com, where you plug in values for total purchase price, a down payment and the anticipated interest rate.
Then you can see what your actual principal and interest payment will be based on those numbers. Remember there are other costs to consider, such as homeowners insurance, property taxes and potentially mortgage insurance depending on the loan option you choose.
Look at that overall loan payment and ask yourself whether you will feel comfortable making it every month.
Kim says, "Here's a great idea to make sure you're ready for this financial commitment. Calculate the difference between what you're currently paying in rent and what an all-in payment on a mortgage would be. Start saving that difference in a specific savings account every month. If you can comfortably save this amount each month, you'll know if you can make the mortgage payment. If you can't, you'll want to consider a more affordable mortgage amount."
Don't forget about home maintenance expenses after you own your home like lawn care equipment, tools and utilities.
Visit macu.com/mortgage to find a link where you can schedule an appointment with a mortgage expert who will guide you though the homebuying process.
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Equal Housing Lender
NMLS ID 462815
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