Financial Education

I remember when my husband and I bought our first home – there were SO MANY questions whirling through our minds. All the details we needed to think about seemed endless. Having “survived” the process in good shape, I have a few tips for WCCU members who are looking to buy their first home.

Get a snap-shot of your credit history. The best way to get informed is to contact a WCCU mortgage loan officer and get pre-approved for a loan. They will work with you to on your credit history, find the best mortgage and determine how much of a loan you can afford.

Down Payment To avoid something called private mortgage insurance or PMI for short; you will typically need 20% down payment. If you are like most first time home buyers you won’t have quite that much. On loans with smaller down payments, PMI protects the financial institution if a default were to occur.

Find out how much you can afford. Once pre-approved for a mortgage, the loan officer will inform you the maximum loan amount you are eligible to receive. It’s a good idea to go over your budget with great detail and determine for yourself how much you are comfortable paying on a monthly basis.

Getting ready for the new mortgage payment. You don’t want to spend so much on your mortgage and real estate taxes that you can’t enjoy going out to eat or movies with friends. To get comfortable with a potential first mortgage…my husband and I did a test. We set aside in savings the difference in our current rent and the amount of a new mortgage on our first home. After six months of doing so, we felt comfortable that we could afford a new home. PLUS, the additional savings was used towards the down payment once we made our purchase

Our example worked like this: We were approved for mortgage/taxes of $1,300 per month. Our rent before buying was $750 per month. So, we started putting away $550/month into our savings account. After six months we had an additional $3,300 down payment.

Additional Expenses You also want to keep in mind additional bills that will arise. Many times for a first time homebuyer you will escrow with your mortgage. So, that $1,300 payment would include your annual property tax and your homeowners insurance. Little things also add up once you buy a house. Consider extra expenses before you decide the maximum monthly payment you can afford. Things like furniture, appliances, landscaping, blinds, decorations, interior decor, lawn mower, or for us Wisconsinites a snow blower! These are all significant purchases that can put you back if you don’t plan ahead.

Seek professional help One of the best options for a first time home buyer is to connect with a great realtor. They help you through the process including finding properties that meet your needs, set up showings and provide pricing of current houses in the marketplace.

With your realtor, be specific about your perfect home. The perfect location including school district or town. Keep in mind each municipality have different property tax rates and this will determine how much you can get approved for as well.

Once you’ve found the perfect home, you are ready to make an offer with the help of your realtor. For my husband and I, this was the most stressful part of home buying. It was well worth the effort…being a homeowner is amazing and challenging all at the same time. So take a change if it makes sense for you, experience is so rewarding once you finally get those keys and go into "your home" for the first time. Good luck!