Your home is likely to be the largest purchase you make and potentially your largest ongoing expense. Because of this, it’s important to make sure you are fully prepared financially. Before you fall in love with your dream home, do these four things.
Run the Numbers
The market might be in a good position for buying, but if your finances aren’t yet ready to take on the expense of a home, you need to make a plan to get there. Remember that when you buy a house, you’re not only going to be making your mortgage payment; you’ll be responsible for taxes, insurance, and upkeep as well.
In a previous article, Sean Mansell, Loan Servicing Manager at Consumers, advises that you buy less than you can afford. If you buy at the maximum of what your budget allows, you’ll find yourself strapped at the end of the month and vulnerable to falling behind should an emergency hit. By ensuring you have extra cash on hand, you’ll be able to start an emergency savings account to cover any unforeseen expenses.
Our website offers many calculators you can use as you decide what you can afford. The New York Times website also offers a calculator you can use to compare the cost of renting to buying.
Review Your Credit Report
If it’s been awhile since you last checked your credit report, request yours for free from AnnualCreditReport.com. You are entitled to a copy from each of the three major credit bureaus each year at no charge. You will want to make sure all of the information on the report is accurate prior to applying for a mortgage.
Decide Whether to Save for a Down Payment
Consumers offers a variety of loan programs for both first time buyers and those looking to “move up” or purchase a vacation home. For those looking for a primary residence, little-to-no down payment loans are available. They do often carry higher monthly and upfront fees than traditional loans with 20% down payments; however, with interest rates at historic lows, it’s rare that purchasers can save enough fast enough to make a difference in their monthly payment. Your Consumers loan officer can evaluate which options best suit your individual needs.
If you decide you should save up for a down payment, you can set aside your savings in any account that will allow you access to the funds when you decide you’re ready to buy. Certain accounts, such as IRAs, even offer additional benefits. If you meet certain requirements, you can avoid early withdrawal penalties when withdrawing from your IRA to purchase your first home. Applicants are encouraged to consult with a tax advisor regarding potential IRA and mortgage benefits.
Get Your Mortgage Pre-Approval
Apply today, get preapproval tomorrow when you get your mortgage from Consumers.* Apply online or call 800.991.2221 to discover the custom-made mortgage option that’s right for you. Our mortgage specialists will work with you to review your home financing needs and help you find the best solution.
If at any point in your decision making process, you have a question about home buying, we always invite you to contact us. Our loan officers look forward to helping you achieve your financial goals.
*Some restrictions apply. Offer subject to verification and credit approval. An active checking is required.