Buying a first home | Johnston Sunrise
By Dave DeCubellis, Senior Vice President of Residential Lending, Navigant Credit Union
As someone who has been in the home lending industry for just over 20 years now, guiding individuals and families through the first home buying process is a responsibility that I deeply appreciate and I take it very seriously.
Buying a home – especially buying your first home – is big business. Sure, it can be a bit overwhelming at times, but – with the right preparation – it doesn’t have to be. Here are some questions to ask yourself in order to make the first home buying process the exciting and memorable occasion that it should be.
Is it the right time to buy my first home?
The answer to this question will always depend on the personal situation of the potential buyer, but – in general – the answer is yes, now is the best time to explore home ownership. Interest rates have been on a downward trend for most of the past two decades, and they are currently at historic lows.
When I started my career a little over 20 years ago, I remember granting loans with interest rates as high as 13%. Today, it is realistic to be approved for rates of around – or in some cases even lower – 3%. These historically low interest rates allow potential buyers to increase their budget and afford “more homes”.
OK, interest rates are historically low. But the houses themselves seem more expensive than ever. Isn’t it a wash?
Well, not necessarily. Yes, the cost of housing inventory is the highest right now (for context: those 13% rates I remember issuing 20 years ago were back when you could buy a house for $150,000 or less), but what makes the interest rate so high? important element of this transaction can be summed up in one word: “fixed”.
Buying a home is a long-term investment, and in most cases, the interest rate you accept at signing is the rate you commit to for the full term of your loan. Locking yourself into a low interest rate protects you from market fluctuations and could save you a lot of money in the long run. Plus, it gives you a predictable, fixed monthly payment that you know you can afford.
I’m ready to get serious.
What is my first step?
The home buying process begins with you and your family. Before you start attending open houses and falling in love with neighborhoods, it’s important to take an honest look at your financial situation and ask yourself if you’re ready to take this step. This involves setting and maintaining a budget, tracking your spending, and understanding your existing debt and credit history. If you decide you’re ready to pursue the goal of home ownership, it’s time to start the process.
Gather your financial documents and call a loan originator.
Most lenders require potential buyers to provide a set of financial information with their application. At Navigant Credit Union, we generally ask applicants to provide:
• Two most recent payslips
• W-2 forms for the past two years
• Two most recent monthly bank statements
• Income tax returns for the last two years, if you are self-employed
Think about your down payment.
While there are some mortgage products that don’t require any upfront money, first-time homebuyers should generally plan to save at least 3% to 5% of the total loan to use as a down payment. Depending on your budget, you can decide to increase this down payment in order to reduce your monthly payments.
Gather your team of experts.
You will quickly learn that the home buying process has many moving parts and each step requires its own level of expertise. Throughout the transaction, potential buyers will work with real estate agents, loan officers, lawyers, appraisers, inspectors and a host of other professionals. It’s important to find a team of experts that you can trust and who understand your goals and objectives.
Don’t forget the “little things”.
Remember: The total “price” of the home is only one part of the home buying transaction. You need to think about (and budget for) things like property taxes, homeowners association fees, insurance, realtor commissions, and other closing costs.
I found the house of my dreams.
How quickly can I be approved?
As a lender, I must emphasize that buying a home shouldn’t feel like a race. It’s a big decision, and big decisions should always be made with patience, preparation, and intention.
That said, the honest answer is that you can be approved for a loan almost immediately after submitting your application. We understand that “dream homes” don’t come on the market every day, and – assuming your finances are in order and you qualify for one of our loan products – our team at Navigant Credit Union will work with you to make this dream a reality on whatever schedule works for you.