Buying a home is a significant milestone in your life. It can be both exciting and overwhelming. Before searching for the perfect home, it’s important to understand your finances and if you can afford the property and related expenses. Our financial checklist will help you navigate the buying process.
CALCULATE YOUR BUDGET
How much should you spend on a home? Consider your monthly income, expenses, debts, and savings to determine how much you can comfortably afford to pay for a house. As just a general rule of thumb, aim to keep your monthly housing payment under 30% of your gross monthly income. Your total monthly housing payment includes principal, interest, real estate taxes, homeowner’s insurance, and association fees, if applicable.
CHECK YOUR CREDIT SCORE
Find out what kind of credit you have. Your credit score sometimes helps determine the mortgage interest rate you will receive. A higher credit score can mean lower interest rate. Once you know your score (click here for steps to get a free copy of your credit report), you can take steps to improve it if necessary. However, Lisle Savings Bank is proud to not price our Mortgages based on credit score. So, if you do have limited or no credit history, you’re not penalized with a higher Mortgage rate with our bank. We’re here to help, so be sure to reach out to us to learn more about the Mortgage process.
GET PRE-APPROVED FOR A MORTGAGE
Work with a qualified lender to get a pre-approval letter. This gives you an idea of how much you can borrow and shows the seller that you have been pre-approved. Knowing this information helps narrow down your search and focus on homes within your budget. Working with a local lender that can help guide you through the Mortgage and home buying process can be a smart decision. Reach out to us today to start the conversation!
FACTOR IN CLOSING COSTS
Determine the amount of fees associated with buying a home, such as appraisal fees, title insurance, points, and attorney fees. In most cases, Lisle Savings Bank does not charge points on our Mortgages, and we pride ourselves on providing our homebuyers with low closing costs. Closing costs can range from 2-5% of the purchase price, so be sure to factor them into your budget. Compare rates and costs between lenders, and get an official Loan Estimate before choosing a loan.
CONSIDER THE DOWN PAYMENT
Most lenders require a down payment between 3-20% of the purchase price of your home, depending on the type of mortgage you qualify for and if the lender requires PMI (Private Mortgage Insurance). LSB does NOT require PMI. Keep in mind, the down payment, loan term, and interest rate will determine what your monthly payments will be. Check out LSB’s Best Rate Tool for our current interest rates and monthly payments based on your individual circumstances.
CALCULATE PROPERTY TAXES AND INSURANCE
Research property tax rates in your area and budget accordingly. Homeowners insurance is required by most lenders and varies based on the value of your home and the coverage you choose. Consider property tax and insurance expenses when determining how much you can afford in monthly mortgage payments.
Buying a home is an exciting financial step, but it is important to approach the process with a solid plan. By making informed financial decisions, you will be prepared for the responsibilities of homeownership. Seek the advice of trusted professionals, family, and friends. When you are ready to begin your home search, please contact us at Lisle Savings Bank to discuss our Mortgage Products. We are here to help!