Moving into your first home can be exciting and stressful all at the same time. Buying your first home is the biggest decision you will most likely ever make. While the investment is significant, if done correctly, it will provide you with many benefits over the long term.

With spring in full bloom, now is the perfect time to begin the search for your dream home. If you are a first-time home buyer, here are a few tips to consider as you prepare for this exciting adventure.

 

Down Payment

Start with an evaluation of your financial position. Determine how much money you have saved towards a down payment. Typically, down payments vary between 5% – 20% of the agreed upon purchase price for a home. Be sure to set aside enough money in savings for an emergency fund. It’s a good idea to save at least three to six months of living expenses to cover unexpected costs. Check out our blog on Ways to Save Money Short-term and Long-term Goals for more tips.

Debt-to-Income (DIT)

Take a look at your current and expected financial obligations, such as car payment, auto insurance, credit card debt, and student loans. Make sure you will be able to fulfill these monthly payments along with your mortgage and other household expenses. According to the American Bankers Association, it is best to keep your mortgage and utilities between 25% – 35% of your gross monthly income. Recent regulatory changes have changed the limit on the debt-to-income (DIT) ratio on most loans to 43%.

Credit Score

A high credit score indicates strong creditworthiness to lenders. As a first-time homebuyer, expect to have your credit report pulled by a lender during the application process. Conversely, a low credit score can hinder your ability to obtain a low interest rate on a mortgage. In this case, you may want to delay buying a home as well as research some available options on how to increase your credit score. Check out our blog, Higher Credit Scores Mean More Housing Options, for other tips.

Budget

Create a household budget. Do some research online to learn more about the average cost of utilities in your area, such as oil or gas, electricity, water, cable, telephone, etc. Don’t forget to factor in the cost of yard maintenance and other basic repair costs, such as having your furnace serviced annually. In addition, you will need to include property taxes and home owner’s insurance. For other tips, refer to our blog on Creating a Budget You Can Stick To.

 

While there are many advantages to owning a home, you also want to be mindful of how long you plan to own it. The longer you stay in your home, the more likelihood there is to build equity in it over time, which can be used to make improvements to the interior and/or exterior, pay for your child’s college education, or refinance some high interest credit card debt. Give some thought to your current life and work situation to determine how long you may realistically stay in your new home.

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Written by Dawn Beers

Dawn Beers

Dawn heads up our marketing department where she is responsible for the general oversight and management of the Bank’s marketing and public relations initiatives. This involves managing the planning, organizing and directing of our advertising, public relations, product development, sales promotion and research efforts.

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