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Tips for Homebuyers

Know your complete budget

When determining your home budget, it’s important to consider your income, debts and expenses. For the home itself, you’ll likely consider principal, interest, taxes and insurance. However, it’s important to know all of your expenses, which also include utilities, cost of commuting, upgrades, association fees, etc. One example is to call the utility company and ask for an estimate of the utility expenses for the house you’d like to buy. Once you have a complete list of all of your expenses, you’ll have a clearer picture of what you can afford. Try living for a few months on a “pretend” mortgage payment to make sure you can afford the housing budget you’re considering.

Know your credit score.

When you decide to buy a home, you should first get a copy of your credit reports to make sure that you are not being unfairly penalized for erroneous, old or settled debts. Also, try not to apply for new credit a year before you apply for financing – and wait to do so until after you have closed on your home. The higher your credit score, the lower your down payment and monthly payments will be. In general, a credit score below 660 is going to result in significant fees or a higher down payment. Buyers with a score of around 720 will see much better deals and those with scores above 750 will get the best rates.

Get pre-approved for your home mortgage.

Before you truly begin house hunting, you need to get a pre-approval letter in order to know how much house you can afford. For a pre-approval, you will need to provide your lender with full documentation and verification of income and assets (e.g. pay stubs, last years’ W-2s, federal tax returns, recent bank statements, your credit report, etc.) to determine how much to lend. While not a commitment of how much financing you have secured, a pre-approval letter helps to expedite the underwriting and loan process. Most sellers only will accept an offer from a buyer with a full pre-approval letter.

Know the housing market that you're considering.

It’s no secret that the housing market has experienced many ups and downs in the past several years. Interest rates have varied as well. When buying a home, you should know the current market conditions and how they will affect your home purchase price. It’s also important to work with a realtor who has a solid understanding of the housing market, so that they can help you negotiate your home purchase.

Don't buy unless you plan to stay put.

When looking to buy a home, the general rule is that you should plan to be in the same location for at least five years. If you move prior to the five-year mark, you likely will lose money on your purchase. Between closing costs and the monthly mortgage payments, which are structured so that you pay more interest in the first few years that you own the home, it is best to identify a home where you want to plant roots for at least five years – and start paying down the principal of your mortgage.

Look for a home in a good school district.

Excellent schools establish that an area is a good location in which to live. Of course if you have children, schools are a priority. Even if you don’t have kids, homes located in good school districts are more expensive, but worth the investment, especially when considering resale. Houses in school districts that are rated highly are more popular and in-demand than those in sub-par school districts. Even during a down market, home prices in great school districts fair better than those where the schools are not rated highly. 

Work with professionals.

Most real estate transactions include more than two dozen professionals – from mortgage brokers, real estate agents and underwriters to insurance assessors, attorneys and inspectors – all play a very important role in your home-buying experience. Since each professional has such a specific role in educating, executing and advocating for you during your purchase process, be sure to work closely with him or her. 

Don't skip the home inspection!

A home purchase likely is the single largest investment you’ll make in your lifetime, and a home inspection is well worth the extra cost to ensure that there are no hidden problems in your home. When you walk through the home, you only can see what is visible to you. A home inspector can see what is visible and invisible. Unlike with a car, there is no “check engine” light when something needs attention in a home. Home inspectors physically inspect the property from the roof to the foundation. They examine the condition of the roof, plumbing, heating, cooling, etc. and provide their findings in a written report within 1-2 days of the inspection. If trouble spots are found, you can return to the seller with the information and recommend adjusting the selling price. The Federal Savings Bank and your realtor can recommend reputable home inspectors. 

Don't sign anything until you read and understand it.

The home-buying process includes a great deal of paperwork, but always take the time to read and truly understand what you are signing. Don’t be afraid to ask questions if a document that you’re reading does not make sense, or seems inaccurate. Especially at closing, it will take some time for you to review documents. Remember that this is a big investment that you’re making, and you deserve as much time as you need to read and understand everything that you’re signing and promising.

For more tips on buying a home, call to speak with one of our expert mortgage bankers or if you're ready, get started today. We're here to provide you with a clear path to home ownership!

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