North County Credit Union

What Newbie Home Buyers Need to Know

by Susan Tiffany, CCUFC / April 11th, 2019

Buying your first house is an exciting time, but admittedly a little scary, as well. The allies at your credit union have your back. They can help you minimize anxiety by being prepared.

If you haven't already, call a loan officer there and have a conversation about your questions and your goals. The lender is likely to share with you some version of these steps:

Know your credit report

Go to and get your credit report from all three of the reporting agencies; you get one free report a year. This step is important because your credit score can make a huge difference in how much you qualify to borrow and what you pay for the money.

Usually, we suggest you order one credit report every four months from a different credit bureau. But when your plan is to buy a house, check all three at once because your goal is to identify anything that could scuttle your loan or drive up its cost. If you find errors, correct them. That won't happen overnight so, even if your home purchase is several months in the future, make sure your credit report is up to snuff now.

If the facts are accurate and reflect a sloppy credit history, expect to spend at least six to 12 months cleaning things up with flawless credit habits.

Here's how much difference it makes, if you qualify: On a $150,000 30-year fixed-rate (3.85% annual percentage rate) mortgage, with an excellent score of 760 or higher, your monthly payment would be $703 and you'd pay $103,033 in total interest. But a credit score of 620 would cost $846 a month (5.4% APR) and rack up $154,407 in total interest payments.

Know what other documents will be useful

You'll need several other records when you talk to your lender:

Some of this information is available to your lender online, so you may not need to search for them yourself. When you call to make an appointment, ask what papers you should bring.

Know what you can afford

This depends on a few things: Your income and its stability, how much you have for a down payment, and your existing debt level are all elements that come into play.

Maybe you have heard the 28 / 36 guideline. This means:

These are guidelines. You also have to consider how much of your monthly cash flow you want to put into house payments so you don't end up "house poor." Think in terms of what house payment you can handle and still have money for savings, education, vacations, entertainment, childcare, and other priorities.

Know your savings status

You'll have to come up with anywhere from 5% to 20% down on a conventional home loan—or from $7,500 to $30,000 on a $150,000 house. Here again, your credit union loan officer can help you learn about options you're eligible for that can bring the numbers within reach.

In addition to a down payment, be prepared for these expenses, which you can't roll into your mortgage:

You can expect to shell out for paint, window coverings, appliances, and other basics to make your new place move-in ready. That's why you don't want to draw down your entire emergency fund to come up with a down payment.

So if you don't have a down payment—and an emergency fund—it's a little premature to think about buying a house. Here again, your credit union lender can help you calculate what you need and how much you want to keep on hand for the inevitable expenses that arise after you buy a house.

NCUA Equal Housing Lender
Printed Monday, July 6, 2020

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