Are you thinking about buying a new home? Is it your very first home, or has your family outgrown your current home? Whatever your circumstances may be, the outcome is the same: you want a new house! We hope that you will find this information helpful as you start the process of buying a home.
The first step to buying a home
The first step to buying a home is talking to a Bank of Sullivan lender. We’ll help you pre-qualify, get an idea how much you can afford, help you understand your credit, understand the different loan products available to you, and what you can expect as you start looking. A pre-qualification doesn’t guarantee that you will get a loan, but it may be expected when you make an offer on a home. It assures the realtor and seller that you are serious about buying, and that you have taken the right steps toward buying a home; starting with financing.
What can you afford?
Determining how much home you can reasonably afford is an important step in understanding the buying process.
- The first step is to determine your gross monthly income.
- Next, determine your total monthly debt. This does not include utilities, car insurance, or daily living expenses.
- Your monthly housing expense, including taxes and homeowners insurance should not exceed around 28 - 30% of your gross monthly income.
- In addition, your monthly housing expense plus your other total monthly debts cannot exceed 41 - 43% of your gross monthly income. Each of us has a unique situation and different loan programs may be more flexible than the suggested guidelines, but this will give you a starting point. At Bank of Sullivan, we have an easy chart that helps you to calculate the guidelines above, and we are always happy to help you through it.
Tips for the first time home-buyer
- Know your credit. Understanding your credit and taking the time to discuss any credit issues with a qualified Bank of Sullivan Lender may mean waiting a few months to buy a home, but it may also help you afford more home, and get a better interest rate.
- Look for first time home buyer’s programs. Some are tailored for people with slight credit issues, and most can help people who haven’t saved a lot for a down payment.
- Get pre-qualified! Pre-qualification is a pretty casual process, where the lender will look at your credit, discuss your income, and tell you how much home you can afford based on the information you have given. It doesn’t cost a thing and will help make the process of buying a home much easier.
- Don’t borrow too much money. Buying your first home doesn’t necessarily mean that you should get the biggest loan (and home) that you can qualify for. Budgeting is an important part of homeownership. There will be unexpected expenses that occur when you own a home, and it helps if you can be somewhat prepared. It is a good idea to have 3 months reserves (equal to 3 months' worth of expenses) after closing to help you handle the added costs of owning a home.
- Trust your lender. At Bank of Sullivan, we have the same standards and ideals that the Bank has had for over 100 years. We are your friends, our kids go to school together, we shop together, and we have your best interest at heart. We are your community mortgage lender, and want to stay that way. You can trust that your loan is the best that the industry has to offer.
- Plan for closing costs. There are fees involved with buying a home, and you should be prepared to pay for those fees in some way. Each loan program has guidelines that allow for the fees to be paid in full or in part by the seller, the lender, a gift, from a loan, or your 401K. You should always understand what your expected closing costs will be and how much of that you might have to come up with on the day of closing. A good faith estimate will be provided to you after you apply for a loan, and at Bank of Sullivan, we will also give you an estimate when you apply.