What First Time Home Buyers Need to Know
Buying a house can be an exciting time for you! But we know it can also be a little scary. Here at Members Plus Credit Union, we want to make sure that we minimize your anxiety as much as possible.
If you haven’t already, call a Real Estate Mortgage Representative at 781-905-1500 and have a conversation about your questions and your goals. Here are some of the things you might talk about:
Go to annualcreditreport.com and get your free credit report from all three of the reporting agencies; you get one free report a year from each. You’ll need to know your credit score so you can have an informed conversation about next steps. Your credit score can make a huge difference in the rates you qualify for.
For example, if you qualify: On a $150,000 30-year fixed-rate (3.85% annual percentage rate) mortgage, with an excellent score, of 760 or higher, your monthly payment would be $703 and you’d pay $103,033 in total interest. But a credit score of 620 would cost $846 a month (5.4% APR) and rack up $154,407 in total interest payments.
When you talk with a Members Plus Credit Union lender about applying for a home loan, you’ll need several other records:
- W-2 forms.
- Financial account statements. Collect statements, including those from retirement accounts, for the past few months.
- Lines of credit. If you’ve opened any in the past six months, you’ll need copies of those statements because they might not show up on your credit report.
- Information about vehicles you own. Include make, model, and resale value.
- Auto-loan account information. Include account numbers and statements.
- Credit card account information. Include numbers and types of cards, balances, and minimum payments.
- Other loan account information. Include student loans and personal loans.
- Gifts. If any money for your down payment was given to you, identify how much and where it came from. Be prepared to document that it’s a gift and not a loan.
What Can you Afford?
Your income and its stability, how much you have for a down payment, and your existing debt level are all elements that come into play. Maybe you have heard the 28/36 guideline. This means:
- Your total monthly housing commitment—mortgage principal and interest, property taxes, and homeowners insurance—should be no more than 28% of your income before taxes and other deductions, called your gross monthly income.
- Your total debt—meaning house payments plus student loans, car loans, and credit cards—should be no more than 36% of your gross monthly income.
These are guidelines. Think in terms of what house payment you can handle and still have money for savings, education, childcare, vacations, entertainment, and other priorities.
You’ll have to come up with as much as 3% down on a conventional home loan—or $9,000 on a $300,000 house. Here again, your Members Plus Credit Union Mortgage Lending Representative can help you learn about options you’re eligible for that can bring the numbers within reach.
In addition to a down payment, be prepared for these expenses, which you can’t roll into your mortgage:
- Closing costs for title search, appraisal fee, loan origination fee, and more
- Utility hook-up charges
- Prepayment of taxes, interest, and property insurance
- Moving expenses
Depending on the state of the house that you are purchasing, you can also likely expect to need to purchase paint, window coverings, appliances, and other basics to make your new place move-in ready. Here again, your Members Plus Credit Union lender can help you calculate what you need and how much you want to keep on hand for the inevitable expenses that arise after you buy a house.