NuVision FCU July 2015
Preparing for Homeownership

Buying a home can be both an exciting and challenging process. With commitment, planning, and learning, you can become a successful homeowner. Below are some areas to consider as you embark on this time in your life.

Saving for the Purchase
The first step to homeownership should ideally begin well before you purchase a home - saving. There are several things you may want to save for, including:
  • The down payment: In the past, homebuyers needed to put down at least 20% of the purchase price to get a mortgage. Today, you may be able to buy a home with as little as 0-5% percent down (although 100% financing can be extremely hard to find). If your down payment is less than 20%, you may be required to purchase private mortgage insurance or get a second mortgage at a higher interest rate.
  • Closing costs: Closing costs are the fees required to obtain a mortgage and transfer ownership of the home, such as attorney costs, an appraisal, title insurance, a recording fee, points, and a loan origination fee. You may have to pay the fees yourself, although sometimes the seller will pay them or you can have them financed (included in the mortgage)
  • Post purchase reserve funds: You may need to show the lender that you will have savings left over after you purchase the home. This provides assurance that the mortgage can be paid even if you are experiencing cash flow problems. At least three months' worth of mortgage payments is a good amount to have in reserve.
  • Extras: If you plan to buy a fixer-upper, appliances, or new furniture, include these costs in your savings plan.
Credit scores
In order to get a mortgage, especially one with a low interest rate, you usually need to have a good credit score. The most common scoring model is the FICO score, issued by Fair Isaac Corporation. Scores range from 300-850 - the higher, the better. Your score is calculated using data from your credit report, which is compiled by three bureaus: Equifax, Experian, and TransUnion. A lender may check your score from all three bureaus or only one. Payment history, amounts owed, length of credit history, new credit, and the types of credit used are all used to calculate your credit score.

Reviewing your credit report regularly is a good idea, but it is a particularly important to do so before seeking a mortgage. Even if you always make your payments on time and have a low level of debt, your credit report could contain score-lowering errors. Check your report at least 60 days before you plan to apply for financing, as it can take some time to resolve issues.

You can obtain your credit report from Experian, Equifax, and TransUnion free once a year through the Annual Credit Report Request Service A NuVision Real Estate Loan Consultant can you get started today on a loan that is right for you.

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