💰 Financial
The 3 most important financial aspects to consider are income, savings, and debt. A lender will review employment history, debt-to-income ratio, credit scores, and how much money may be available for down payment. All of these aspects demonstrate financial stability.
- Income: A steady paycheck is key! Use the 33% rule—spend no more than 33% of your gross income on housing (loan, taxes, insurance). 25% may also be ok; 33% is a more conservative approach.
- Savings: Have 2–3 months of living expenses saved up plus funds for your down payment.
- Debt: Keep your debt-to-income ratio below 40–50% for better loan approval chances.
💳 Credit Score
The higher, the better! FHA loans start at 580+. Check your score yearly at annualcreditreport.com. A good rating helps lenders decide whether to approve a mortgage application and what interest rate to offer. The higher the score, the better the mortgage rate you may get. Different loan types, have different score requirements. Tip: To boost your credit score, focus on paying down debt, making payments on time, and correcting any errors on your report. Keeping your credit utilization low will also help you achieve a better score! Better to have ‘older’ credit cards than apply for new cards.
💸 Down Payment & Closing Costs
FHA loans require as little as 3.5% down. Closing costs can range from 2–5% of the home price. Tip: Aim to have 5–8% of the home’s value saved to cover all expenses.
Closing costs include:
- Agent commissions
- Inspections, appraisals, surveys & HOA fees
- Lender & title fees
You’ll get an estimate early in the process from your lender. When you find a house to apply for, you can also get an estimate. A final breakdown 3 days before closing will be provided to you.
🏦 Monthly Mortgage = PITI
This is a common acronym for loan principal, loan interest, taxes, and insurance.
Use a mortgage calculator or talk to a lender or agent to estimate your monthly costs. Don’t forget to set aside money for home maintenance and repairs!
🏡 Loan Types
Don’t stress over all the loan options out there—you’re not expected to know it all! A great loan officer will walk you through the choices and help you find the one that fits your needs and budget. Their job is to make financing clear and manageable, so you can focus on finding your dream home with confidence.
FHA Loan
- Backed by the government
- Lower credit score required (580+)
- Minimum 3.5% down payment
- MIP (Mortgage Insurance Premium) required (With a down payment of 10% or more, the MIP is only required for the first 11 years.)
- Ideal for first-time buyers or those with less-than-perfect credit
Conventional Loan
- Not government-backed
- Higher credit score needed (usually 620+)
- Down payment can be as low as 3%
- PMI (Private Mortgage Insurance) required when your down payment is less than 20%. (It’s typically paid monthly and can be removed once you have enough equity.)
- Often lower overall cost if you have good credit
Bottom Line:
FHA = more accessible.
Conventional = better long-term savings if your credit is strong.
📈 Long-Term Investment
Buying a home is a major investment that can grow your wealth over time through equity. To avoid losing money when reselling, it’s best to stay in the home for at least 5 years. If you’re military or expect to move sooner, buying may still work—just be smart about the location and look for a home with easy value-boosting improvements.
👩💼 Real Estate Agent
Choosing the right agent is key—they’re there to protect your interests and guide you through the process. A great agent knows the city, neighborhoods, schools, and traffic, helping you buy wisely. You’ll also sign a buyer’s rep agreement to clarify the relationship and any costs.
🔍 Where to Begin
Start with a loan officer—they’re like the money wizards who tell you how much house you can afford without eating ramen forever. Once you’re pre-approved, then connect with a real estate agent to help you hunt down your dream home. If you don’t have a loan officer, then ask your real estate agent for recommendations. Happy hunting!
🏡 Ownership is Rewarding!
While owning a home comes with costs, it also brings long-term value, stability, and the freedom to make a space truly yours. With the right team and guidance, the home buying journey doesn’t have to be stressful—it can actually be exciting and fun! From dreaming up your wish list to getting the keys, it’s a rewarding step toward building the life you want.
Info provided by Kathy Masterson (License #788021) in good faith and intention.
All info should be verified!
