The road to home-ownership — Where do I start?
Figure out what you can afford; get preapproved
When you're buying a home, mortgage lenders don't only look at your income, assets, and available down payment. Instead, they look at all of your liabilities and obligations—including auto loans, credit card debt, child support, your overall credit rating, and more. Those variables, along with the mortgage program you select, will determine how much of a mortgage you may be able to obtain.
If you still need time to save for a down payment and/or you need to work on your credit score, skip to the next section. If you already have a down payment ready and you know your credit is in a good place, the next step is getting preapproved, or prequalified, from a Reliant mortgage expert. Getting prequalification from Reliant is free, and it is a great way to get a better handle on what you truly can afford. When you work with someone from our mortgage team, you'll walk away knowing how much home you can afford, which can help you narrow your home search. You'll also have greater negotiating power when you include a prequalification letter when you put an offer on a house.
Click here to get started with your preapproval today!
Save for a down payment
You may need to save for your down payment before getting preapproved. In order to be able to save, first you need to know how much is necessary to save for a down payment. Today, most purchasers can expect to put down anywhere from 5% to 20% of the purchase price—but at Reliant, we have programs that require as little as 0% to 3%. Here are a few savings strategies to consider:
- Grants for first-time home buyers are very popular. Many work with a matching funds concept, where the purchaser deposits a sum and the grant matches those sums, sometimes as much as four times the amount! Reliant has helped many purchasers with locating grant funds, and we may be able to help you, too!
- Tax refunds. The average tax refund check has been reported at $2,815. This amount is nearly 3% of the purchase price of a typical first home in Reliant's membership area. By saving this amount and adding systematically, you can meet your goals more quickly than you'd expect!
- Gift funds from a relative. In the past, if a purchaser used a gift from a relative to buy his home, the banks required the purchaser to have at least 5% of his own money invested in the transaction. Those days are in the past, and today, a gift from an eligible relative can be used for the entire down payment and any closing costs with many of Reliant's mortgage programs.
- Tapping into other sources. First-time home buyers can withdraw from an IRA without penalty to purchase a home; those who are married can withdraw even higher amounts. That being said, there may be income tax on the withdrawal, depending on the IRA. Consult with your tax advisor for further details about tax implications
Check your credit report
Your credit and your credit score matter, and they can impact more than just your mortgage—they can affect mortgage interest rates (and/or fees), credit card approvals, homeowners' insurance rates, and possibly even job applications. Your credit plays a significant role in qualifying for a mortgage, and the higher your score, the better your mortgage terms will be. Paying bills on time is critical to having good credit and good credit scores. Scores range from 300–850 and are based on your payment history, the amount of debt you owe, how long you've used credit, and how you've managed it, as well as several other factors. The national average score is 725. With scores below that mark, loans can be obtained—but more options are available for those with higher scores. Click here for some tips on improving your credit.
Federal law allows you to get a free copy of your credit report from each credit reporting company every 12 months. It is important that you review the information on your report to ensure that it is correct and up-to-date. For a free credit report visit annualcreditreport.com .
Learn about mortgage rates
Mortgage rates fluctuate frequently. To familiarize yourself with rates, and to be kept in the loop about changing rates, take advantage of Reliant's Rate Watch service. When you sign up for Rate Watch, we'll email you rate information. You can choose to have rates emailed on a regular basis, or you can choose a specific rate or range, and receive an email when rates meet your criteria.
Choose Reliant Community Credit Union as your lender!
Reliant's professionally trained mortgage staff has the expertise and confidence needed to answer your questions and help you through the whole process, from pre-approval through closing.