Home Ownership Resources
Buying a home will likely be the largest purchase you’ll ever make. Before you start house hunting, it’s important to understand how owning a home could impact your finances.
Financial Impact of Home Ownership
- Down Payments – A down payment is what you initially pay for the house, while the rest of the payment comes from your mortgage. This large initial investment includes the down payment plus closing costs, which total at least 3 percent of the home’s purchase price. Although the minimum down payment varies depending on the buyer, making a down payment of 20 percent exempts you from needing to buy private mortgage insurance (PMI),.
- Mortgage Payments – Monthly mortgage payments are not comparable to monthly rent payments. Even if the monthly payment amounts are similar, owning a home means that you’ll also be responsible for paying taxes, homeowner’s insurance, renovations and repairs, utilities and other types of fees typically covered by a landlord. Don’t forget appliances, new furniture and all the extras that come with home ownership.
Lease, Rent or Buy?
- Leasing a Home – If you are only looking to stay in a home for a specific period of time, consider leasing a home through a contractual agreement with the owner. Leases are typically for six to twelve months, but can be set for any length of time specified in the agreement. Leases are longer-term and more strictly defined than rental agreements. While rental agreement terms can change monthly, lease contracts can only be changed once the term of the lease is up.
- Renting vs. Buying – To determine whether renting or buying is better for your needs, consider how much you are willing to invest in a property. Renting a house involves a lease where the tenant pays rent to occupy the property, and it typically involves periodic payments. If tenants have a contractual agreement to rent over a period of time, they sign a lease. Renters are not always responsible for the maintenance and upkeep of a home, while homeowners are responsible for appliances, repairs and other utilities. The benefits of buying a home will also shift as the real estate market changes.
Pre-Qualification and Pre-Approval
You can potentially increase your financial security while showing the seller that you’re able to follow through with payments. To do that, you need to be pre-approved for a mortgage. Pre-approval is essentially proof that a lender is willing to loan you money. Being pre-approved for a mortgage gives both you and the seller confidence that you’ll be able to pay for the home, thereby increasing your purchasing power.
The first step is pre-qualifying for a mortgage. Before a financial institution will pre-qualify you, it will evaluate your finances, including your income, debt and assets to give you an idea of the mortgage amount you can expect to receive. Pre-qualification is easier than it may sound because it can be done over the phone or online, usually with no cost involved. Pre-qualifying for a mortgage is a way to initiate a discussion about your mortgage options and what you can afford.
Pre-approval involves a more thorough verification of your finances to make sure that you can afford to make home mortgage payments. Here are some of the documents you’ll be asked to provide:
- Complete loan application and all normal loan disclosure forms
- Current pay stub
- Last year’s W-2
- Complete federal tax returns if self-employed or commissioned/bonus
- Most recent account statements (checking, savings, mutual funds, 401k and IRA)
- Credit Report
When it comes time to bid on a property, a pre-approval letter from your lender can be shown to sellers to confirm that you already have financial backing and the ability to go through with the sale, which makes you a much more attractive buyer to sellers. However, be aware that pre-approval is not an absolute commitment from the lender.
There are many types of mortgages to consider, such as:
- ARM: With an adjustable rate mortgage, the interest rate may go up or down. Many ARMs will start at a lower interest rate than fixed rate mortgages. This initial rate may stay the same for months or years.
- Fixed: With a fixed rate mortgage, the interest rate is set when you take out the loan and will not change.
- VA: Available to eligible service members and guaranteed by the Department of Veterans Affairs (VA), with little or no down payment required.
- FHA: Insured by the Federal Housing Administration (FHA). Down payment may be as little as 3.5%, but the purchase price is limited.
Our mortgages are available nationwide, and you can learn more about the variety of fixed and variable mortgage options available to you here.
Additional Home Ownership Resources
- HomeAdvantage®: A FREE service exclusive for members of The Partnership FCU, designed to make home buying and selling easier! HomeAdvantage® can help you search, buy, sell and save on your next home!
- Home Loan Toolkit: A step-by-step guide provided by the Consumer Financial Protection Bureau that can help you make better choices along your path to owning a home.
- Calculators: Before you decide to purchase or refinance a home, make sure it’s financially feasible. We’ve provided a wide range of calculators for you to use to determine some preliminary answers. Plug in your figures and see if it all adds up.
- TruStage Auto and Home Insurance: Affordable, top-quality protection and discounted rates specifically for credit union members combined with online convenience and 24/7 claims service.
The U.S. Department of Housing and Urban Development (HUD) provides support to a nationwide network of Housing Counseling Agencies and counselors who are trained and approved by HUD to provide tools to current and prospective homeowners and renters.
The Federal Trade Commission also offers information on homes and mortgages, as well as mortgage relief scams.