First Time Home Buyers Education Center

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Are you ready to buy?

Whether you are starting a family or are looking to make a long-term financial investment - it's important to assess if you are ready to buy your first home.

Credit

Having an excellent credit score can reap all sorts of benefits when it's time to qualify for a mortgage. Improve your score by consistently paying bills on time (especially car loans or other major loans) and aim for lots of available credit (if you have a $10,000 credit limit, but only have a $500 balance - this will help your score.)

Your Job

Mortgage lenders like to see at least a 2 year history at the same job (or same industry) to show stability. This helps the underwriter determine the future likelihood of your income.

Budget

It's time to think about how much of a home payment you can afford. In some cases, a mortgage payment may actually be cheaper than your rent - and you will already have established good habits in making this payment each month. If you aren't paying rent currently, it's good practice to set aside money each month equal to your ideal mortgage payment (and use towards your down payment savings!). This will help you get used to the idea of paying money each month and you'll be able to see if that works with your current lifestyle and expenses.

Down Payment

Depending on the loan product you choose (or even if you have served in the military) the minimum amount of down payment you can provide can range from $0 to 20%. Typically, most new home buyers put between 3.5% to 5% down. This means on a $100,000 property, you should have at least $3,500 towards your down payment. Keep in mind, you'll need extra funds for real estate commision, closing costs, moving expenses, and unexpected expenses (repairs or new furniture, for example). Many loan products also allow the use of gift funds from a family member to be applied to either the down payment or closing costs (or both!).

How much can I afford?

The relationship between your debt and your income will help determine how much you can afford.

Income

This is your total monthly income. It also includes the income of your spouse or any co-borrowers who will apply on the loan with you. Any numbers you provide should be "gross" (before taxes or other withdrawals). If you are self-employed or have part-time income, ask your loan officer for questions on how to calculate this type of specialized income.

Debts

All monthly payments on your debt (including the monthly debt for any co-borrowers). Debts include car payments, credit card payments (not balances), student loan payments, and other types of debts. This debt does NOT include your rent (if you're moving out of your apartment once you buy your new home), utlity bills, cell phone bills, or subscription accounts (like Netflix or Gym Memberships).

By dividing all of your monthly debt into your total income, lenders determine a "ratio". The lower this ratio is - the better - it means you have more income available for your new home.

It may be helpful to try our First Time Home Buyer Calculators, where you can enter in your specific information and get a detailed analysis.

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