Mortgage Made Easy: How to Unlock Your First Home

Ah, the excitement of buying your first home! Many of us dream about that day—when the home tours begin and the images of what could be start to feel real. But before you sign your name on those (seemingly hundreds of) pages, there are a few important steps to take.

The first step in your journey is to determine what you can realistically afford. While you can look at homes before completing any paperwork, it’s always better to know your budget upfront so you don’t fall in love with a house you won’t be able to purchase.

Luckily, there are online calculators that can give you a rough idea of what’s possible. By plugging in details like your income, debts, and assets, you’ll get an estimated monthly payment.

You may have even heard the old rule of thumb that your mortgage payment shouldn’t be more than about one week’s pay per month. While that’s not an official lending formula, it’s a fairly accurate and easy tip to keep in mind.

Of course, the math doesn’t tell the whole story. Think about your lifestyle:

• Do you like to go out for dinner a couple times a week?
• Do you shop on a whim?
• Do you look forward to traveling at least once a year?

If the answer to any of these is yes, you’ll want to budget for those expenses, too. This is where the phrase “house poor” comes in, when someone spends so much on their home that there’s little left over for the life they enjoy. If maintaining your lifestyle is important, consider aiming for a lower loan amount and communicate that to your lender so they can guide you toward the right options.

Now, while these early calculations are helpful, they’re not a guarantee of loan approval, and sellers usually won’t take them seriously. That’s where pre-approval comes in. Pre-approval is a more formal process. It includes a letter from a lender stating how much they’re willing to lend you, after a full review of your financial situation. This step includes:

• A hard inquiry of your credit report
• Submission of documents like pay stubs, W-2s, tax returns, and bank statements

With pre-approval in hand, you can shop for homes with confidence, and in today’s competitive market, it can give you an edge when making an offer.

Keep in mind that final approval will still be subject to the specific property you purchase, but pre-approval is an essential step in the mortgage process and shows sellers you’re a serious buyer.

If you’re just beginning to explore whether you can afford a home, start with a calculator, which can give you an idea of what you may be able to afford. Be sure to take the time to meet with your credit union and ask questions to ensure there are no surprises down the road.

Home buying often moves quickly and requires timely decisions. Doing your homework now means you’ll be better prepared when the time comes to make an offer.

Our Crane Credit Union lending team is here to help. They will answer any questions you have along the way. Reach out today, and let’s explore the possibilities of homeownership together!