Six Simple Steps to Buying a First Home
Article courtesy of ANB
There’s never been a better time to buy a home. Interest rates have reached unprecedented lows, which doesn’t just mean lower monthly payments, but savings for the entire life of the mortgage. But there’s more to a home purchase than monitoring interest rates. Kelsey Lloyd, an Assistant Vice President in the ANB mortgage loans department, shares six important steps for customers thinking of buying their first home.
- Save for a Down Payment
Long before you start scoping out “For Sale” signs, make sure you’re financially prepared. A house is the biggest purchase most people will make, so don’t take it lightly. “Start saving money now,” says Lloyd. The larger a down payment you can provide, the better your rates and mortgage term will be.
ANB’s first-time homeowners program offers conventional loans that require a minimum 3 percent down payment, or $7,500 on a $250,000 home. A government-backed FHA loan from ANB requires a 3.5 percent down payment ($8,750 on a $250,000 home).
- Establish an Emergency Fund
It’s also smart to build up an emergency fund. Even if your monthly mortgage ends up comparable to a previous rent payment, expect to face additional repair costs, utility payments and other expenditures that add up quickly. ANB customers can schedule automatic monthly transfers into a basic deposit account as they pursue their savings goals. Most financial experts suggest setting aside at least three months’ of expenses in an emergency fund.
- Improve Your Credit Score
It’s also important to pay down existing debt. Find out your credit score and take steps to boost it. You’ll benefit from better rates. “Take care of anything derogatory on your credit score, like past due or late payments,” she says. “If you have credit card debt, try to pay it off or reduce it as much as you can.”
Once you’ve made progress on these steps, there’s still one more critical stage before you start shopping: Learn how much house you can actually afford. During pre-approval, a mortgage loan officer at ANB will look at your finances—including your income and credit history—to determine what amount they’re willing to lend.
This can be enormously helpful once you begin house-hunting. “You hate to see a couple fall in love with a house they can’t quite afford,” Lloyd says. “But if you’ll get pre-approved, you can make sure your budget is in line with what you’ve qualified for.” It also provides potential reassurance to a seller that you can back up an offer. However, a pre-approval isn’t binding. It provides an estimated payment, but keep in mind things change,” she explains. For example, a monthly mortgage payment can include variables like escrow and insurance. “Just because it’s $1,000 now doesn’t mean it’s staying $1,000 throughout the lifetime of the mortgage.”
If, for some reason, you don’t get approved, all is not lost. ANB is perfectly willing to maintain a relationship. “Don’t give up. We’ll work with you throughout the process. If we can’t do it now, maybe we can in six months or a year,” says Lloyd.
- Start Searching but Hold Steady
After pre-approval, it’s time to find a real estate agent and browse for the home of your dreams. In the process, keep your finances stable. You don’t want to make any dramatic spending decisions that might alter your credit score. “Be wise where you’re spending your money,” says Lloyd. “Don’t acquire any new debt or move large amounts of money around. Don’t buy a car in the middle of trying to buy a house.” In other words, you got pre-approved based on your existing financial situation. Make sure that situation stays constant while you’re shopping.
- Make an Offer and Be Patient
Once you find the right place, make an offer, and negotiate the contract, start packing. The inspection, appraisal and escrow process can take some time. Most purchases require 30 to 45 days for closing. Thankfully, ANB is local and family-owned, which means quick decision-making and faster closings than other institutions. “You’ll have a loan officer you can talk to in person—we’re here for your random questions and whatever comes up,” Lloyd says. “And because we’re a community bank, we can get things done more quickly than some of the bigger mortgage companies. Plus, we’ll keep your loan right here in Texas.”
To start the pre-approval process and apply for a mortgage, visit ANB.com