Building lifelong relationships with our members to help them achieve their financial goals.
Winter 2012 - Vol. 6, No. 1
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Becoming a Homeowner means doing your Homework
Are you tired of renting? Do you want to enjoy the pride that comes with having a place you can call your own? Do you want to take advantage of some fantastic low rates on home loans? The road toward home ownership for first-time homebuyers can be a pleasant journey filled with excitement and anticipation. Or, it can be frustrating trip wrought with bumps and detours that can make you ask yourself: "Are we there, yet?"
It's a good idea to check your credit report and credit score before applying for a home loan so you'll get an idea of what lenders will see. You can obtain a free credit report each year from the three major credit reporting companies at www.annualcreditreport.com.
Basically, your credit score gives lenders an estimate on your credit risk, meaning how likely you are to repay the loan. Credit scores range from 300 to 850, with a good score at about 720 or higher. Your score changes over time depending on several factors, including payment history, amount owed to creditors, length of credit history, new credit opened and the types of credit you currently use.
Remember, positive information stays on your credit report forever, while negative information, including bankruptcies, will remain for up to 10 years. You can improve your credit score by paying bills on time, reducing credit card balances and keeping your balances below 50% of the available limit.
Buying power and pre-approval
Once you've got your finances and credit in order, you'll need to consider just how much home you can comfortably afford. Knowing your buying power depends on how much money you can provide on a down payment, as well as your total income and other financial obligations, such as car payments.
Most lenders now require a 20% down payment to get the best rates and avoid being required to maintain costly private mortgage insurance (PMI), which protects the lender if you don't repay the loan. Plus the more money you put down up front, the lower your monthly mortgage will be. Generally, the amount of your monthly mortgage payment (principle and interest, property taxes and home insurance) should not be more than 28% to 36% of your monthly gross income.
You'll also need to have available funds to pay for closing costs, mover's fees, utility hookup charges, as well as prepayment of taxes, interest and insurance. Depending on the situation, closing costs may range from 2% to 7% of the loan amount. Currently Travis Credit Union offers a no points, no fee option which can save you a lot of money at closing.
One of the best ways that you can focus on properties you know you can afford is to seek pre-approval from a reputable lender, such as TCU. Sellers typically view a pre-approved buyer's offer more favorably than buyers who have yet to start the home loan process. Also, pre-approval saves time when you're ready to make the purchase.
You can do it
Remember, becoming a homeowner means doing your homework. If you've got a steady job and income, have your spending under control, have a good credit history and don't plan on moving in the next few years, you're could be a homeowner sooner than you think.
Need more information?
Our friendly and knowledgeable mortgage loan consultants in our Home Loan Center are eager to discuss your refinancing options. Please call (888) 698-0000 today, or click here to learn more or apply online.
Source: BALANCE Financial Fitness Program
No points, no fees!
Refinance your home loan
Take advantage of record-low interest rates and refinance your current home loan to a new 30-year fixed rate. You'll enjoy lower monthly payments and free up more cash for other things.
Contact our friendly mortgage loan representatives in our Home Loan Center at (888) 698-0000 or click here to learn more.
*APR as low as 3.99% fixed for up to 15 years, based on 80% loan-to-value or less. For $200,000 loan, payment would be $1,478.37.
**APR as low as 4.49% fixed for up to 30 years, based on 80% loan-to-value or less. For $200,000 loan, payment would be $953.68.
Rates as of Dec. 16, 2011, subject to change until locked. Financing available up to $417,000 (or the conforming loan limit for your county) for owner-occupied California primary residence properties only. Payment example does not include insurance or taxes. Property insurance required. Some restrictions may apply. If impound account for taxes and insurance is desired, you are responsible for those set-up amounts and any charges assessed by your current lender such as reconveyance fees, payoff demand fees, pre-payment penalties and any interim interest collected at closing. Offers cannot be combined with other discounts or promotions.
NMLS registered. Equal Housing Lender.
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