First-Time Homebuyer

Your First Home Awaits

Buying your first home is an exciting milestone. ProFed Credit Union is here to make the process as easy as possible. Our first-time homebuyer loans provide you with the financial support needed to turn your dream of homeownership into a reality.

The journey toward homeownership can be overwhelming, especially if it’s your first time, but let’s walk through it together. You can shop with confidence when you are preapproved for your mortgage. Check out our requirements and resources to get started. 

RESOURCES

Step 1: Prepare To Become A First-Time Homeowner | Credit Score, Budget, and Down Payment

What’s your credit score? A credit score tells a lender how likely you are to pay a loan back on time based on your credit history.

Understanding how your credit score impacts your interest rate for your mortgage. Things that affect your credit score include amounts owed, payment history, length of credit history, credit mix, and new credit. In addition to your lender pulling your credit, you can order a free credit report every 12 months from Equifax, Experian, and Transunion. ProFed also offers a free Credit Score Tool inside ProFed Digital Banking, where you can keep tabs on your credit score.

What’s your budget? If you already have a budget created, you may have an idea of how much home you can afford. If not, a standard guideline is the 36% rule, meaning your total monthly debt should stay below 36% of your gross income. Use ProFed’s calculator to see how much home you can afford.

Example Listed Below.

*Mortgage payment includes Principal, Interest, Taxes and Insurance (PITI)

What's a down payment? A down payment is an amount a borrower pays upfront when purchasing a home. The larger the down payment, the lower your interest rate is because it’s less risky for the lender when the buyer has more equity in the home.

Step 2: Learn Who & What Is Involved In Becoming A Homeowner | Experts, Terms & Mortgage Payment

There are many experts involved on the road to becoming a homeowner. It’s essential to know how each expert is involved in the process.

8 Homebuying Experts

1. Real estate agent: A person who acts as an immediate between sellers and buyers as they attempt to find real estate or property for their client.
2. Property inspector: A professional hired to inspect a property and find any issues.
3. Mortgage lender: A financial institution that loans you money.
4. Underwriter: A representative from a financial institution who determines whether to approve or deny your loan.
5. Appraiser: An expert whose job is to assess the value of the property you are purchasing.
6. Loan officer: A representative from a financial institution who assists borrowers in the application and mortgage process.
7. Loan processor: A representative who deals with the mortgage loan's eligibility, analysis, and processing.
8. Closing or settlement agent: This role may be filled by a real estate agent, attorney, or title company who conducts the closing meeting of the purchase. 

Throughout the homebuying process, you may hear familiar or unfamiliar terms used. Here is a list you can reference. 

9 Homebuying Terms

1. Annual Percentage Rate (APR): The entire year's interest rate applied to your loan.
2. Debt-to-income (DTI) Ratio: All your monthly debt payments are divided by your gross monthly income to tell you how much you owe each month vs. how you earn.
3. Loan-to-value (LTV) Ratio: The mortgage loan amount divided by the property's value. 
4. Preapproval: Qualification for a loan of a specific value range.
5. Escrow: A portion of your monthly payment is held in an account to help pay property taxes and insurance when they come due.
6. Equity: Property you've paid off and own. 
7. Points: Often called discount points, borrowers pay a one-time fee to lower the interest rate on their mortgage.
8. Gross Income: Your income before taxes or deductions.
9. Closing Costs: The costs to close the purchase, which usually include origination and underwriting fees, taxes, insurance premiums, title/record filings, etc., comprise 3-6% of the total mortgage loan.

What will your monthly mortgage payment look like?

A monthly mortgage payment has four parts, which can be shortened to the acronym “PITI.”

Monthly Mortgage Payment - PITI

Principal: The part of your monthly mortgage payment that decreases the balance of your loan.

Interest : The part of your monthly mortgage payment put towards the interest on your loan.

Taxes: The part of your monthly mortgage payment held in escrow until tax payments are due.

Insurance: The part of your monthly mortgage payment held in escrow until your insurance payments are due.

Step 3: Process Of Buying A Home | Preapproval Process, Homebuying Tips, Find The House

The next step in buying a home is to get pre-approved. Work with a financial institution like ProFed to get pre-approved for an amount you can borrow to purchase your home.

What Documents Does a First-Time Homebuyer Need?

You must gather many documents to get pre-approved for your first-time homebuyer loan. These required documents often include: identification, savings and checking statements, tax returns, W-2s, employment history, and paycheck stubs that include YTD income.

12 Financial Tips For a Successful Loan Application

1. Keep records of income, assets, and current debts.
2. Prepare to provide receipts from your personal bank account or gift funds.
3. Maintain the same employment/income to prove stability.
4. Build a savings plan for a deposit, down payment, and closing costs.
5. Be aware of credit pull activity.
6. Ask questions & communicate openly with your homebuying team.
7. Be careful not to open, close, or transfer large amounts across bank accounts without consulting your loan officer.
8. Don’t deposit large sums outside your automated payroll deposit without consulting your loan officer.
9. Avoid changing employers or jobs without consulting your loan officer.
10. Avoid making major purchases before or during homebuying.
11. Don’t open or close new lines of credit.
12. Avoid stress or hiding anything from your homebuying team.

Once you’re pre-approved, it’s time to find the ideal home. As you begin searching, think about what you want in a home. Remember to stick to the homebuying budget you created, look at not one but many different properties, and prioritize the ones you like by ranking location, features, and layout.

Step 4: You’re A Homeowner! | Homeowner Tips

Congrats, homeowner! After you’ve closed on your home, here are some tips to get started.

First-Time Homeowner Tips

• Celebrate with family and friends
• Update your address on your utilities, mail, ID, car registration and insurance, voter registration, address on bank and credit card accounts, address for employer, etc.
• Give thanks to the team of homebuying experts, including your real estate agent, lender, etc.
• Meet your neighbors
• Secure local experts in the area like a doctor, vet, etc.
• Manage your mortgage loan payments (+ more) in ProFed Digital Banking