If you’ve decided to become a homeowner for the first time this year, congratulations! Buying a home in 2022 is a process that’s filled with emotions ranging from the excitement of open houses, the worry over the seller accepting your offer and the happiness of closing day.
Successful homeownership depends on many factors. Among them is knowing how much of a home you can afford so that you can live in it happily ever after. Here are some quick tips that will help you when buying your first home.
How to Buy a Home
Buying a home may appear daunting at first but education is the first step. The more you understand the home-buying process, the more prepared you’ll be. Travis Credit Union offers a free on-demand webinar First-Time Homebuyers 101 that can help prepare you for your home-buying journey.
This webinar discusses how much home you can afford, how to shop for a home and how get approved for your loan. You’ll also learn about closing costs and how you prepare for them. Learn about other on-demand webinars here.
Key Costs to Consider
First-time homebuyers will find that online mortgage calculators, such as the one found at Travis Credit Union, will show you an expected monthly payment based on the loan amount, interest rate and term of the mortgage, which is typically 30 years.
While this is a good starting point for your research, there are other costs to consider in your mortgage payments. If you are putting less than 20% of the price of the home as a down payment, lenders will require that you add private mortgage insurance (PMI) to your loan as protection in case you default.
Along with your principle and interest payment, your monthly payment may also include a payment to an escrow account to cover property taxes and homeowner’s insurance payments. You can decide whether to have these costs included in your mortgage or pay them separately.
Escrow payments are amortized over 12 months and are estimated by your loan servicer. At closing, it’s a good idea to have two months of escrow payments ready to ensure you’re prepared for any unforeseen taxes or premiums. Your escrow account is analyzed every year by your lender. If too much is being collected, you’ll receive an escrow refund. If too little, your escrow payment may increase in the upcoming year, raising your monthly payment.
Another possible increase to your mortgage may be a homeowner’s association fee if you live within one of these communities. HOA fees may rise over time so be sure that your budget can absorb unexpected fee increases or assessments imposed by the association.
Finally, remember to factor in utilities such as electricity, water, gas, internet, phone, trash, sewer and other services into your home costs. These bills can add up quickly.
What Type of Loan to Get
If you’re looking to buy your first home but are worried about your ability to qualify, consider applying for a Federal Housing Administration (FHA) Loan. Under this program, which is backed by the federal government, you may qualify for a mortgage if you have a lower credit score than conventional lenders may accept.
Down payment requirements on a FHA loan are as low as 3.5%. Plus, Travis makes it easy to apply online for a FHA loan.
To explore all of your home loan options, visit the TCU Mortgage Hub. Our professional and knowledgeable Home Loan Team will help find the best loan to fit your unique financial situation.
Good luck on your first home-buying experience!