Five Steps to Homeownership

It’s a good idea to start preparing for homeownership several months before applying for a mortgage.  Follow these five steps to improve your purchasing power:

 

  1. Save for Your Down Payment
    It’s wise to save as much as possible.  A larger down payment improves your ability to get lower interest rates and smaller monthly mortgage payments.  Programs are available to borrowers who have small down payments.  The Federal Housing Administration (FHA) requires a down payment of only 3.5%.  The U.S. Department of Veteran Affairs offers 100% financing for qualified military veterans or reservists.   
  1. Check Your Credit Score
    Good credit is essential to obtaining the best mortgage rate.  Before applying for a mortgage, get your credit in shape.  Check your credit report (for mistakes or items that are reported in error) before applying for a mortgage.  Correcting issues up front often improves credit ratings and helps borrowers obtain lower interest rates.  Visit
    Your Credit Scores for an overview of what matters most in credit scores.  You are legally entitled to receive a free copy of your credit report once every 12 months from each of the three nationwide consumer reporting companies.  To request your free credit report, visit AnnualCreditReport.com.
  1. Get Pre-approved for Your Mortgage
    It’s important to know what you can afford, so you can search for homes in your price range.  Pre-qualification is not the same as pre-approval.  Pre-qualification can be a good starting point, but it isn’t binding and doesn’t give you any leverage in the home buying process.  To become pre-approved, a lender checks your credit report and completes other assessments to determine how much money you can borrow.  A pre-approval shows sellers that you have the ability to close the loan on the property, making you a much more attractive buyer when negotiating your home purchase.

 

  1. Know How Much Money You Will Need
    Your down payment can come from your own funds, a gift from a qualifying family member or even a loan from your 401(k).  Your total out-of-pocket expense is comprised of your down payment, closing costs (cost of title company fees, appraisal, credit report, and lender fees), and prepaid expenses (property taxes, homeowners insurance, and prepaid interest due at closing).  You can reduce your out-of-pocket expense by negotiating to have the seller pay your closing costs and prepaid expenses.  The seller cannot contribute your down payment.  

  2. Understand the True Cost  
    Homeownership costs aren’t limited to your mortgage payment.  Develop a monthly budget (including insurance, utilities, groceries, etc.), so that you can determine what is realistically affordable in terms of a mortgage payment.  Be sure to include savings for home maintenance and repairs in your budget.

It’s a good idea to start preparing for homeownership several months before applying for a mortgage.  Follow these five steps to improve your purchasing power:

 

  1. Save for Your Down Payment
    It’s wise to save as much as possible.  A larger down payment improves your ability to get lower interest rates and smaller monthly mortgage payments.  Programs are available to borrowers who have small down payments.  The Federal Housing Administration (FHA) requires a down payment of only 3.5%.  The U.S. Department of Veteran Affairs offers 100% financing for qualified military veterans or reservists.   
  1. Check Your Credit Score
    Good credit is essential to obtaining the best mortgage rate.  Before applying for a mortgage, get your credit in shape.  Check your credit report (for mistakes or items that are reported in error) before applying for a mortgage.  Correcting issues up front often improves credit ratings and helps borrowers obtain lower interest rates.  Visit
    Your Credit Scores for an overview of what matters most in credit scores.  You are legally entitled to receive a free copy of your credit report once every 12 months from each of the three nationwide consumer reporting companies.  To request your free credit report, visit AnnualCreditReport.com.
  1. Get Pre-approved for Your Mortgage
    It’s important to know what you can afford, so you can search for homes in your price range.  Pre-qualification is not the same as pre-approval.  Pre-qualification can be a good starting point, but it isn’t binding and doesn’t give you any leverage in the home buying process.  To become pre-approved, a lender checks your credit report and completes other assessments to determine how much money you can borrow.  A pre-approval shows sellers that you have the ability to close the loan on the property, making you a much more attractive buyer when negotiating your home purchase.

 

  1. Know How Much Money You Will Need
    Your down payment can come from your own funds, a gift from a qualifying family member or even a loan from your 401(k).  Your total out-of-pocket expense is comprised of your down payment, closing costs (cost of title company fees, appraisal, credit report, and lender fees), and prepaid expenses (property taxes, homeowners insurance, and prepaid interest due at closing).  You can reduce your out-of-pocket expense by negotiating to have the seller pay your closing costs and prepaid expenses.  The seller cannot contribute your down payment.  

  2. Understand the True Cost  
    Homeownership costs aren’t limited to your mortgage payment.  Develop a monthly budget (including insurance, utilities, groceries, etc.), so that you can determine what is realistically affordable in terms of a mortgage payment.  Be sure to include savings for home maintenance and repairs in your budget.
 

Copyright © 2017 Capstone Mortgage Company, Inc.

  NMLS Company ID #1445; MA Broker License #MB1445


Copyright © 2017 Capstone Mortgage Company, Inc.

  NMLS Company ID #1445; MA Broker License #MB1445