Home Buying – Getting Your Feet in the Door
May 18, 2020
Home ownership can be a dream come true. Crossing the threshold for the first time, and just knowing that it’s yours! Arranging and rearranging the furniture, hanging pictures (with nails!), grilling in the backyard, or whatever the comfort of home means to you.
Buying a home is an exciting time filled with big decisions. You may find the home-buying process a little more challenging these days due to the pandemic, but with options like virtual home tours and Zoom meetings to maintain social distancing, homes are still selling, and lenders like Unison are still lending. Plus, mortgage rates are still exceptionally low. A little extra patience, planning, and flexibility when it comes to timelines, can go a long way in finding the house you want and getting the loan you need.
Here are a few important home-financing tips:
Put aside money for a down payment – Most lenders require some type of down payment, which can reduce monthly payments and make it easier to secure a loan. With a down payment of 20% or more, you can usually avoid paying Private Mortgage Insurance (PMI).
Clean up your credit – A good credit score is crucial to getting the best financing. A credit score of 700 or higher is ideal, especially in today’s economy.
Start by getting a free copy of your credit report at www.annualcreditreport.com. Check your report for errors, dispute any mistakes and lower your debt if possible, especially revolving credit like lines of credit or credit cards. Also delay applying for any new credit during this time to avoid lowering your credit score.
Look at your budget – Estimate what you can realistically afford each month, including your mortgage payment, interest, insurance, and property taxes. If your down payment is less than 20% of your home’s value, also add the estimated monthly cost of Private Mortgage Insurance (PMI).
Financial experts, including Unison’s Member Advisors, suggest that you allocate no more than 25 percent of your monthly budget toward housing. According to a 2019 Consumer Reports article, one-third of home-buyers reported that they spent more than they expected when purchasing a home. While no one can predict the future, factoring in home maintenance costs along with your payments and allowing for other living and emergency expenses in your overall budget will benefit you in the long run.
Types of mortgages – Choosing the right mortgage depends on your situation and what you can afford. There are basically two types of mortgages, and terms can vary depending on your financial institution:
- Fixed Rate Mortgage – Fixed monthly payments for the length of the loan can make it easier to budget, especially if you plan to stay in your home for a longer time. While loan terms vary per financial institution, at Unison we offer both 15-year and 30-year fixed-rate mortgages*
- Adjustable Rate Mortgage (ARM) – With a lower initial interest rate, an adjustable rate mortgage may be attractive if you’re planning to move or refinance in a short amount of time. Unison offers 3- year, 5-year and 7-year ARMs*
Get preapproved – Getting preapproved for your mortgage is one of the most important steps you can take toward getting a mortgage. While a preapproval letter isn’t a mortgage guarantee, it gives you a ballpark amount of how much house you can afford. It also lets the seller know that you are a serious buyer and may even give you an edge if you’re competing with another buyer who isn’t preapproved. The preapproval process is similar to applying for a mortgage and if you go with the same lender that preapproved you, it can save you a few steps and valuable time when applying for the actual mortgage.
Getting on the path to home ownership may be easier than you think, and at Unison Credit Union we’re here to help you get your feet in the door. Whether you simply want to know more, or if you’re ready to get started on your mortgage application, our Unison Member Advisors are happy to answer your questions and help you determine which type and length of mortgage may work best for you.
We recently teamed up with a panel of experts to host a Virtual Home Buying Seminar. If you sign up and watch the seminar, we are offering $500 off closing costs for a limited time. Click here to claim your coupon:
*Check out our rates page here: Rates are based on a $120,000 loan amount at 80% loan to value for a purchase of a single-family primary residence. Minimum representative credit score of 760. To receive $500 off closing costs, the loan must close. The borrower will be entitled to a $500 lender credit, no part of the funds can be applied to principal reduction or purchase price. Only 1 coupon can be applied per borrower or transaction, offer is non-transferrable. Valid on owner occupied, 1-4 family residential properties. Membership eligibility and credit approval required. Limited time offer. Equal Housing Opportunity Lender, NCUA insured.