Home Ownership

You Have to Start Somewhere...

Determine what you can afford. Ballpark: You can generally afford a home equal in value to between 2-3 times your gross income. Your lender can provide details pertaining to your specific situation.

Save for the down payment. Ideally, save 20% of the purchase price to use as your down payment. Additionally, closing costs (i.e., taxes, transfer fees, lender fees, etc.) can average 2-3% of the home purchase price.

Check your credit. Review your credit reports from the three major credit bureaus (Experian, Equifax and TransUnion) to ensure they are factually correct. Immediately make any necessary corrections before meeting with your lender or mortgage broker. You may visit Web sites such as www.annualcreditreport.com to check your credit scores. Keep in mind that your credit score or "FICO score" determines your credit worthiness and the eventual interest rate on your loan.

Investigate mortgage programs. There are many different loan programs that include options such as 30-year, 20-year or 15-year fixed mortgages; adjustable rate mortgages (ARMs); and government-backed loans such as FHA (www.fha.gov) or VA loans (www.va.gov). FHA loans are insured by the government, require certain minimum standards as defined by the FHA, and typically allow for lower down payments (3-5% of the home price) than conventional loan programs. Spend time thinking about which program makes the most sense for your personality, financial goals and current financial status.

Get pre-approved and a pre-approval letter in writing. Expect to provide your lender with documents such as:

• W-2 forms
• pay stub copies
• bank/credit union account numbers and statements for preceding months
• credit card statements with outstanding balances
• previous addresses for seven years
• copies of brokerage accounts and retirement accounts
• documentation of any additional information
• copies of personal tax forms for the last three years

Once approved by the lender, ask them to provide this pre-qualification in writing, as it has become standard practice for Buyer's agents to submit this letter with the purchase contract. Develop a "Must Have List" and a "Wish List". Identify all items that are essential in a new home as well as a list of “luxury” items.

Choose the neighborhood where you want to live. Select three neighborhoods of interest and consider factors such as schools, recreation centers, expansion plans, neighborhood conveniences, etc.