Buying Your First Home

Making the leap into home ownership can be very exciting – and kind of overwhelming. If you’re looking toward buying your first home, here are some tips that might help you get there:

Assess your budget

Figuring out how much you can afford can be tricky. You can start here:

The 28/36 Rule: A rule of thumb used by many lenders says your monthly housing costs (principal, interest, tax and insurance) shouldn’t be more than 28% of your gross monthly income (before taxes). And your total debt payments like housing, student loans, auto loans and credit cards shouldn’t exceed 36%.

Look at your take-home pay: Some financial experts suggest keeping your monthly housing expenses at or below 25% of your take-home pay to allow you to contribute to savings and have some flexibility.

Check and improve your credit score

To be approved for a mortgage loan, you’ll generally want your credit score to be above 720.

Pull your credit report: You can request a free credit report from each of the three major credit bureaus – Equifax, Experian and TransUnion. That’ll help you see where you are.

Avoid new debt: Don’t open new credit cards, take out loans or finance large purchases while you’re preparing to buy a house.

Explore first-time homebuyer programs

There are a variety of state and federal programs that may help you secure financing and lower interest rates. And you can ask your City banker about our City Start Mortgage for first-time homebuyers with low to moderate income. With more flexible credit score allowances and little to no down payment, it could help make your dream of owning a home a reality.

Save for upfront costs

You’ll need some cash on hand when it’s time to make the purchase.

Down payment

Though some loans require a sizable down payment, there are options for first-time homebuyers that don’t demand such a hefty chunk up front. Find out what’s available to you, then plan to save the amount you need.

Closing costs

Plan for an additional 2% to 5% of the purchase price to cover taxes, fees, an appraisal and other costs that may arise during the purchase process.

Insurance

Your insurance needs will change with homeownership, so you may want to talk to your local agent to get an idea of what to expect before making a purchase.

Whether you’re just curious about homeownership or confident that you’re ready to take the plunge, your local City banker can help. Reach out to your branch for help to determine where you are and what you may need to do to prepare to buy a house, or check out City’s mortgage options.