8 essential tips for buying your first home

Despite frigid weather that slowed real estate sales and a market that could use a bit more inventory, the U.S. Department of Commerce recently announced that winter housing sales across the country are up 5.3 percent from last year.

Mortgage rates remain low and the Associated Press reports “that sales should continue to make progress as the recovery from the housing bust and Great Recession is entering its sixth year.”

Are you looking to buy your first home? Here’s how to ensure the process goes smoothly:

1) Know how much you can afford. While there’s not a fixed debt-to-income ratio that lenders require, the general rule of thumb states that no more than 28 percent of your gross monthly income should be devoted to housing costs.

Calculate your debt-to-income ratio and factor in the cost of a down payment (generally 20 percent of the price of the home). These numbers will give you a good idea of what you can afford.

2) Check your credit. The Consumer Financial Protection Bureau reports that 50 million consumers now have free access to their credit scores from annualcreditreport.com. Remember – just because you pay your bills on time each month doesn’t necessarily mean you have stellar credit. Check your score and understand why you are losing credit points.

3) Know the market. The asking price for a house may not always be indicative of its true value. Take the time to research your market and learn the selling prices of other, similar properties. Websites like Trulia.com and Zillow.com can help.

4) Get prequalified. Mortgage prequalification helps expedite the closing of your purchase – a process that can sometimes linger for months.

5) Organize documents. It sounds basic, but it’s crucial to get your paperwork in order before getting into the home purchasing process.

“Mortgage lenders may request two recent pay stubs, the previous two years’ W-2s, recent bank statements and tax returns,” notes expert Floyd Waters. “Buying a home can take a long time, but knowing where to find everything you need will save time when you’re ready.”

6) Calculate an appropriate down payment. The general down payment for first-time homebuyers is 20 percent of a home’s list price. This payment will immediately add equity to your home as well as lower monthly payments.

Does 20 percent seem prohibitively high? Don’t abandon your home-buying dream just yet.

“Many first-timers don’t have the cash to put up 20 percent of a home’s value,” says Robert Walters, chief economist and vice president of the Capital Markets Group. “No need to worry. Mortgage officers will be able to find alternatives that work for you and your situation.”

7) Explore specialty home loan programs. Some home buyers may have difficulty meeting the strict credit score requirements and hefty down payment demanded by traditional mortgages.

Explore Northwest alternatives like First Time Homebuyers, Affordable Home Loan, Heroes Loan and Advantage 97 programs to open other doors toward homeownership:

First Time Homebuyers

  • Northwest’s First Time Homebuyers program is geared specifically to people who have not owned a home in the past three consecutive years and are having trouble meeting strict credit score and down payment requirements. The program, which can be used to purchase single-unit, owner-occupied properties, helps with competitive mortgage rates, reduced bank fees, lower down payments and affordable monthly payments. Prospective buyers must meet minimum credit requirements and be within the program’s income limitations.

Affordable Home Loan

  • Like the First Time Homebuyers program, Northwest’s Affordable Home Loan program helps individuals who meet certain income requirements to purchase or refinance a home even if she or he has less-than-perfect credit or the means for a big down payment. Through this program, qualified homeowners can purchase single-unit, owner-occupied properties with the benefits of competitive mortgage rates, reduced bank fees, low down payments and affordable monthly payments.

Heroes Loan

  • This program gives active military members, military reservists and honorably discharged veterans access to reduced bank fees, competitive mortgage rates, down payment options as low as three percent and a waiver of private mortgage insurance up to a 90 percent LTV.

Advantage 97

  • If an individual has a steady income and good credit, but limited savings, is homeownership out of the question? Not with Northwest’s Advantage 97 program, which allows homebuyers to shrink their down payment to as low as three percent of the home’s value. Advantage 97 requires no upfront mortgage insurance premium, has no income limitations and comes with no surprises – the monthly principal and interest payments stay the same for the life of the loan.

8) Get your prospective home inspected. There’s no substitute for a home inspection completed by a trained professional. Home inspections may reveal defects that the seller did not disclose (or even know about). A home is one of the biggest investments of your life – make sure you have a solid foundation, literally and figuratively.

The mortgage lending experts at Northwest can help you achieve your goal of homeownership. Visit your local Northwest office or call 1-888-884-4626 to discuss your mortgage needs.