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Advice For the First-Time Home Buyer

Apr 12
6:25
AM
Category | General

Are you a first-time home buyer or thinking about buying a home soon? Greenway Mortgage wants you to feel ready and prepared for the biggest, most exciting purchase of your life. We put together some questions for you to answer so that you can see where you stand currently. Go through and answer each and at the end, if you feel confident and ready, reach out to the team at Greenway Mortgage.

Alright, here we go!

#1 Do you have established credit?

Look below to see where your credit score falls.

If you answered yes, keep making your payments on time. Do not apply for any more credit as it will lower your credit score. Every point counts.

  • Excellent Credit Score: 720-850
  • Good Credit Score: 690-719
  • Fair Credit Score: 630-689
  • Bad Credit Score: 300-629

If you answered no, now is a great time to start building your credit. A credit card or secure loan is a great option. But length of history is important followed by amounts you owe.

#2 How About Your Job?

Two years of employment history is a good rule of thumb. Greenway Mortgage will look at your documented income such as paystubs, tax returns and W2’s.

#3 Have You Been Saving?

You will want to decide how much of a down payment you plan to put down. Keep in mind, that there will be other fees at closing in addition to your down payment. Closing costs can includes fees like:

  • Appraisal
  • Attorney
  • Home Inspection
  • Credit Report
  • Escrow
  • Title
  • Private Mortgage Insurance
  • Property Tax
  • Recording Fees
  • Underwriting & Processing Fees 
  • And more

#4 How Much Can You Afford?

It's an important step to determine how much house you will be able to afford. With that said, there is a general rule of thumb that says your total monthly debt – mortgage payments, car payments, credit cards, gas, utilities, etc. – should not exceed 36 percent of your gross monthly income. Lenders typically follow a similar guideline when a qualifying a borrower for a mortgage, although the exact criteria depends on the lender, the borrower and the mortgage program.

The lender qualifies a borrower for a maximum monthly payment that they can afford based on the borrower’s current financial situation, as well as the down payment amount. Remember, your monthly mortgage payment includes PITI – principle, interest, taxes, and insurance. 

Second, just because you qualify for a certain monthly payment, that doesn’t mean you should purchase a home that puts you right at that limit or anything close to it.  “But wait,” you say. “I’ve crunched the numbers in my monthly budget, and I have no doubt that I can swing that payment with plenty left to spare!”

Are you sure about that?

Do you plan to have kids? Will they go in daycare? If you plan to stay home with your kids, how much income will you lose? Will you start saving for their education? Do you plan to buy a car within the next five years? Would you like to go on vacation? Will this home you’ve fallen in love with require any improvements?  In other words, if these or other life events add significantly to your monthly expenses, will you still be able to swing that mortgage payment? Many first-time home buyers become house poor because they buy based on today and fail to consider where they’ll stand tomorrow.

The Better Question to Ask

First-time buyers constantly come to us and say, “How much house can I afford?” Unfortunately, we can’t answer that question with any certainty. We can only tell you how much of a monthly payment you qualify for. The better question to ask is, “How much should I buy?” Again, the lender can’t answer that question. That’s a personal decision you must make based on your income, lifestyle, family situation, and priorities, both now and in the future.

There is no mathematical formula that tells you exactly how much home you could afford. However, Greenway Mortgage will take the time to discuss these issues with you instead of simply approving you for a mortgage and wishing you luck.

#5 Did You Know There are First-Time Home Buyer Perks?

Greenway makes buying for the first-time easy! Check out some of our First-Time Home Buyer Programs here.

You Can Check out all our First-Time Homebuyer Resources here.

First Time Home Buyer Guide

Want to feel prepared before making the leap into homeownership? If so, this eBook is for YOU! You’ll learn how to navigate the entire process from pre-approval to closing and beyond. Click here for your free First-Time Home Buyer Guide.

#6 Feeling Good About Homeownership?

If you’ve made it this far and feel confident, it’s time to schedule an appointment with one of our Loan Experts. Otherwise, hopefully you now know some things you may need to work on based on your current situation. Either way, homeownership is possible!  There are many options available to fit your specific needs and the Greenway Team is here to help guide you ever step of the way.

Best of luck on this journey to becoming a homeowner!