Holiday Notice: Our branches will be closed on Monday, July 4, 2022, in observance of Independence Day.  


First Time Home Owner Basics

For most of us, buying a first home is a dream come true. However, it can also be a lengthy process where potential — and sometimes very costly — pitfalls trap the unprepared buyer. This guide will help you get prepared.

Decide If the Time Is Right

How do you know if you’re ready? Making the leap from renter to homeowner is a big decision. For some, renting may be the right choice.  Because the “down payment” is most often limited to first and last month deposit, renting can be viewed as cheaper and more flexible in the short-term. Monthly rent payments are also generally “all in” and usually cover all property taxes, homeowners’ association fees and maintenance costs. Plus, renting can offer flexibility should circumstances unexpectedly change.

For others, however, buying is the right move to make. They’ve reached the point where they feel confident about staying in one place for a while and are established in their jobs with a dependable income. Their debt obligations – such as car loans, student loans and credit card payments – are manageable, and they’re interested in exploring how the traditional benefits of homeownership, like favorable tax treatment* and equity appreciation, can enhance their long term financial prospects. If that sounds like you, this guide will help you assess your current situation and better prepare you for the home-buying process.

Renting vs. Buying

Before you buy your first home, there are important things to do and know. Consider which option is right for you. 

Know how much you can afford
Depending on the amount you have saved for a down payment, your mortgage payment should typically be no more than 28% of your monthly income, and your total debt shouldn’t be more than 36%. 

Maximize your credit score
Generally, a better credit score will help you get a better interest rate on your mortgage. And even a small improvement in your score can have an impact on your monthly payment and save you thousands of dollars over the course of your loan. Learn more about how to improve your credit score.

Save for extra costs
Lastly, you’ll need to have some money tucked away for extra costs beyond your monthly mortgage payment. These costs include your down payment and closing costs. A down payment of 20% or more helps you avoid PMI (Private Mortgage Insurance) and lowers your monthly payment. And closing costs are typically 3% - 5% of the total home cost.

Weighing the Costs and Benefits

 Home ownership brings a lot of added responsibilities. But it also has its advantages.


  • Monthly mortgage payment
  • Your down payment – as low as 3% of the sale price
  • Closing costs –typically 3% to 5% of the loan
  • Taxes & insurance
  • Utilities
  • Repairs & maintenance
  • Homeowner association dues or assessments

While these costs will vary from home to home, you’ll want to know what they are before making a final purchase offer.


  • Your home may appreciate in value over time
  • You can increase your net worth by building equity through monthly principal reduction payments
  • Your home is your own – you can do what you like with it to reflect your lifestyle
  • You may save money at tax time by deducting mortgage interest and property taxes*
  • A home offers stability, especially as your children grow up. It’s a place where you can live the life you want, and where you can create the memories of a lifetime.

Getting Pre-Approved

Getting pre-approved by a mortgage lender shows real estate agents and sellers that you are a serious, qualified buyer. And being “qualified” has its benefits. In fact, being pre-approved indicates that you are a serious buyer and may even put you ahead of other applicants once you make an offer!

 Pre-approval also has additional perks worth noting. For instance, it helps you determine how much house you can afford and how much money you can borrow. That way, your time won’t be wasted looking at out-of-reach properties.

 Part of the pre-approval process includes filling out a loan application. To establish your employment history and financial capabilities, you must provide the lender with the following income documentation:

  • Pay stubs for 2-3 months
  • W-2 forms for the past 2 years
  • Most recent 3 months’ bank statements
  • All credit account and debt information

 After the mortgage loan officer receives these documents, he or she will then pull your credit report, assess your financial capabilities, and inform you of how much money you can borrow towards your home.

 Finding the Right Home

Once you’re pre-approved, you can start looking at houses! Now’s the time to contact a reputable real estate agent who can show you homes you can afford.

It’s important to find a real estate agent who will:

  • Help provide background information on properties of interest to you
  • Guide you through the buying process
  • Make it easier to work with the seller

You might also consider hiring a real estate attorney to:

  • Be your advocate during negotiations with the seller
  • Review contracts and research liens and encumbrances
  • Make sure there are no legal surprises ahead

 Get a Home Appraisal & Title Search

Found a home you like? Once the seller accepts your offer, you may strongly consider hiring a certified home inspector who can verify there are no structural problems, code violations or other undisclosed concerns.   When your contract is final, your lender will have the property appraised by an independent, third-party appraiser who will confirm the fair market value of the home.  In addition, a title search will typically be conducted to:

  • Discover any record claims on the property
  • Make sure you can get a clear title to your new home

Closing the Sale

At last – you’re ready to finalize the sale! During the closing, you’ll meet with all parties involved in the sale to make it official by signing documents, receiving the deed and paying your closing costs, which may include:

  • Attorney, broker, credit report and/or lender fees
  • Title search and insurance
  • Appraisal and inspection fees
  • Points – a predetermined fee similar to prepaid interest
  • Paid to the lender to receive a particular interest rate
  • 1 point equals 1% of the loan amount
  • Other costs depending on your particular loan

Property insurance: Also called homeowner's insurance, property insurance protects the homeowner from losses to the property, as well as potential liability from events that occur on the property and elsewhere. Lenders require homeowner's insurance coverage to protect the collateral that secures their loan. Some homeowner's insurance policies do not cover catastrophic events such as tornadoes, hurricanes or floods. These kinds of events generally require a separate insurance policy. Sometimes additional insurance may be required for your loan.

Property Taxes and Homeowner's Insurance: A typical monthly mortgage payment consists of amounts for loan principal, interest, taxes and homeowner's insurance. Taxes and insurance are usually paid from an escrow, or impound, account.

*Consult a Tax Accountant