Save for a Down Payment
Most lenders require a down payment to consider you for a mortgage. It typically ranges from 3% to 25% of the purchase price. The larger the down payment, the more comfortable they’ll probably be approving your mortgage. However, you should also remember that it may be nice to have some extra money available after you move into your new home. New carpeting, new furniture or improving the landscaping all takes money. You should not stretch yourself too thin. Here are some ways to save for the down payment:
As simple as it sounds, most people end up saving for a couple of years to accumulate the amount needed. This may mean less or cheaper entertainment or dining out. One easy way to save is to enroll for an automatic savings plan at your financial institution. Have a certain amount transferred from your checking account to a dedicated savings account each month. This provides some discipline and you may be able to use a money market type of account to earn higher interest.
Borrow the down payment from your retirement plan
Many company sponsored 401(k) or profit sharing plans have provisions to let you borrow the down payment from your retirement plan, but you should carefully consider your options. Check your plan details with your Human Resources department and be sure to talk to a tax advisor regarding tax implications.
Living in a cheaper apartment while you accumulate your down payment can help you get your money faster. Cheaper rent may help balance a longer commute to your job. If you’re just starting out or are considering changing jobs, you may want to consider a area that has a lower cost of living.
Gift from Relatives
Many relatives are willing to help with a first home purchase. Be respectful of their generosity. You will also want to ask your lender if there are any limitations on the total amount of your down payment that can come from gift funds.
Reduce high interest rate debt
Paying off credit cards will take some of your savings, but will save you money by eliminating the high interest rates found with most bank credit cards.
Get a second job and save your earnings
Skip a year's vacation
Buying a home, especially a first home, is a big financial and emotional step. If buying a home is important to you, do your financial homework, investigate your mortgage options and determine what level of monthly mortgage payments will be affordable and comfortable for you.
First Time Homebuyers
Buying your first home can be scary. So many decisions, so much paperwork, so much money. It can all seem so overwhelming. That's why we're here. We've helped thousands of members buy their first home, and we can help you too!
Expert guidance from start to close
From application to closing, Mortgage Loan Consultants will guide you through every step of the lending process. There's no question too big or too small; too complicated or too easy. We're happy to explain your options and help you get the best deal.
Smart options for first-time buyers
We offer a variety of lending options for first time homebuyers. The key is finding one that works for your situation. We listen to you, understand what you want and help you buy a home you both love and can afford. We offer:
- Low down payment options
- Adjustable rate mortgages with low initial payments
- Fixed-rate mortgages with a variety of terms
Applying online is simple
Apply online, by phone or in your branch. We'll get you an answer fast. We can even pre-qualify you for a loan, so you know exactly how much you can spend.
Save with great rates
We offer competitive rates that could save you a bundle over the life of your loan.
Preparing to Borrow
Everyone typically borrows money at some point throughout life. Mortgages, auto loans and college loans help you afford things that may be beyond your current financial reach and credit cards can provide convenience. However, borrowing money can also be cause for serious problems if you rely on it too much or you do the wrong type of borrowing.
As your credit union, we're here to help serve your financial needs, and that includes helping you borrow money. We're also here to help you build a strong financial future. That's why before applying for a loan or a credit card, there are some important things we encourage you to consider:
- Why are you borrowing?
We recommend borrowing for things that provide long-term value before borrowing for things that provide only momentary enjoyment. It's much easier to justify borrowing for a home or a college education than borrowing for a great vacation or a new wardrobe.
Any money you borrow you’ll need to repay with interest. That means if you buy that new wardrobe with a credit card that "sale" may end up costing you more in the end. Be sure you can afford the payments that the borrowing will require. Also, spend some time to find the loan with an interest rate and terms that best fits your situation.
Before sitting down to fill out a loan application or arranging a meeting with a loan officer, here are some items you may want to know:
- Your credit report.
- Proof of income.
- Tax return.
- Personal financial statement.
All lenders will automatically order a credit report and you should know what yours contains. You can visit www.annualcreditreport.com to obtain a free credit report once annually from the three major credit reporting agencies.
Depending on the type of loan, you may need to provide recent copies of payroll check stubs and W2s from prior years.
If you’re applying for a mortgage or a large personal loan, you’ll probably need to supply copies of at least one federal tax return.
For mortgages and other large loans, lenders may require that you supply a financial statement listing all your assets and liabilities. It‘s also a good idea to prepare a personal financial statement annually as part of managing your finances.
What lenders are looking for
Remember that lenders are loaning you money that they want repaid along with interest. This is their business and they want to make sure that you’ll be able to live up to your repayment responsibilities. Along with the items mentioned above, they’ll be looking at other aspects of your finances to get the comfort to approve your loan.
- Stable employment.
- Stable residence.
- Responsible debt management.
Having a steady job can help give lenders confidence that you will have ongoing income to repay your loan. If you have a history of several job changes, it may raise a yellow flag so be sure you can explain them. For example, if you have frequently changed jobs for better opportunities, be sure to mention it.
Lenders like to see at least six months of residence at the same place.
Having a solid history of timely and regular payments also helps give lenders confidence that you’ll be able to handle this debt in the same manner.
The decision to borrow money is serious and we encourage you to thoroughly understand the loan terms and conditions before signing on the dotted line. Spending a little time to think about borrowing and being properly prepared will make the process easier and help you build a stronger financial future.