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Whether it’s your first home, or you’re relocating for retirement, purchasing a home can be the most significant financial choice you make for years at a time. So, what do you need to buy a house? While your specific needs may vary, let’s take a look at some basic early steps on the path to homeownership:

  1. Budget

When it comes to buying a house, the most important thing you need to know is how much you can afford, and how you will be able to save for a down payment on your home. Keep in mind VA loans come with no down payment. We recommend to break down your expenses, this includes the cost of your current rent or mortgage, as well as monthly spending on groceries, utilities, and other items like travel, restaurants, or going to the movies.

Compare your income to these expenses, including any debt you might have. How much of your income is available for a mortgage payment? How much can you save for a down payment? Remember that putting more money down may lead to a lower monthly payment on your mortgage. See if there are expenses you can cut back on and consider saving the money saved from those cuts.

Once you’ve taken a good, hard look at your budget, and have a clear picture of your financial resources, you will be much closer to the house of your dreams.

2. Credit Score

The higher your credit score (commonly referred to as a FICO score), the lower your interest rate may be. This means you will pay less for your home over the life of your loan if you have good credit. Some lenders or loan types may not be available to applicants with low credit scores. Your credit score is based on several factors:

  1. A history of on-time payments
  2. Amount of available (unused) credit
  3. How long your accounts have been open

If you have several long-standing credit cards with minimal month-to-month debt, and a history of no late payments, you can expect your credit score to be good or great. If you have very new accounts, no accounts, high month-to-month debt, and/or a history of late payments, your credit score will be lower.

Fortunately for veterans, service members, and other qualified borrowers, a home mortgage is still possible even with bad credit thanks to VA loans. Our experts at The Federal Savings Bank can help you learn more about your credit score, improve it, and find programs to help you secure financing.

3. Savings

Having some savings is another key step towards buying a house. After down payments, you will need to be financially prepared for closing costs, fees, and the logistical costs of moving. Getting your finances in order, as outlined above, can be a big help in saving for your future.

But you might not need to have 20% of the cost of your home on hand. VA and FHA loans, among other programs, do not require a large down payment – and sometimes have no down payment requirement at all. Keep saving, but know you may be closer to buying a house than you think. The next step will let you know why!

4. Loan Pre-Qualification or Loan Pre-Approval

Consider speaking with a loan officer at a mortgage lender, even if you’re just considering buying a home. They can help you get a pre-qualification letter, which does not commit you to taking out a loan with them, or may not even involve pulling your credit.

This letter will estimate the amount the lender can lend you to purchase your home, based on the information you provide about your income, assets, and debt. Since it is an estimate, the exact amount you may borrow may vary depending on the property you select, as well as the lender’s underwriting process.

A pre-approval letter is an even better tool for a homebuyer. A pre-approval signals to a seller that a lender has already cleared you to take out a mortgage from them. That tells them you’re already that much closer to helping them sell their home. Remember the lender will likely still require an appraisal on the home you select, and they will issue a final approval before you’re clear to close.

There’s a lot to consider when you’re purchasing a home. Start saving and taking care of your credit. A loan officer at The Federal Savings Bank can help you take care of the rest, no matter your financial situation. Don’t wait to start making your new home!

Subject to credit approval. Terms and conditions may apply. Property insurance is required for all loans secured by property.

This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.