OnPath Credit Union

First-time homeownership is an important milestone in many people’s lives. Whether you want more space to grow a family, build wealth through equity or simply make your space your own, embarking on the journey to homeownership can be exhilarating.

To ensure the process goes smoothly and you find the right property for your unique preferences and circumstances, there are several important things to do and consider before you sign on the dotted line.

Know and Improve Your Credit

Your credit score is one of the deciding factors in home loan eligibility. Generally, people with poor credit scores (below 600) may not qualify for a mortgage loan. If you have no or very little credit history, now may be the right time to start building credit. Doing so will show potential mortgage lenders you are responsible and pay back your purchases.

A good way to start building credit if you have none is to apply for a secured credit card. Secured credit cards are usually easier to qualify for and can help you establish good credit as long as you use them responsibly.

Other types of loans, like auto loans, can also help you establish a credit history. Just make sure you can afford to pay off any loans you get for the purpose of establishing or improving your credit score.

Know What You Want and What You Can Afford

One of the challenges many first-time homebuyers face is determining how much they can spend on their new home. It’s not uncommon for people to go after properties that are outside of their budget.

Even if you can afford to make monthly payments with your income, it’s wise to spend no more than 25 percent of your monthly take-home pay on your mortgage payments. Extending yourself beyond a 25 or 30 percent ratio of your income could create budgetary instability, especially if an unforeseen event occurs (like losing a job or experiencing a medical emergency).

Once you figure out how much you can afford, you can narrow your property search and look for homes that fit your budget. 

Save for a Down Payment and Factor in Closing Costs

You’ll likely need to put money aside for additional expenses, such as your down payment and closing costs. Unless you get approved for a government-sponsored mortgage, such as a VA loan, you’ll likely need to save at least five percent of your loan’s value for a down payment. For example, if your loan amount is $300,000, your five percent down payment will amount to $15,000.

Other costs associated with the homebuying process may include:

• Appraisal fees
• Home inspection
• Property taxes
• Home insurance

Explore Mortgage Options

There are several different mortgage loan types first-time homebuyers may choose. Below are some of the more popular types of mortgage loans:

• Fixed-rate conventional mortgage loans: With this type of loan, your interest never changes and your down payment can be as little as three percent
• FHA loans: These loans are backed by the Federal Housing Administration and help people with poor credit or a limited credit history purchase a home
• USDA loans: This loan type is guaranteed by the U.S. Department of Agriculture and can help low-income individuals purchase homes in rural areas, usually with no down payment
• VA loans: Insured by the Department of Veterans Affairs, VA loans are for active and retired military members and usually don’t require a down payment

Once you’ve decided which type of mortgage loan is best for you, it’s a good idea to shop around different loan originators and compare interest rates and fees to find the best lender for you.

Get Preapproved

Once you’ve shopped around and found the best rate, ask the lender for a preapproval letter so you can begin looking for your dream home. Having a preapproval letter shows home sellers you’re a serious and qualified buyer. To become preapproved for a loan, your lender will check your credit and ask for documents pertaining to your current income, assets and expenses.

Find the Right Mortgage Solution for Your Louisiana Home with OnPath Federal Credit Union

At OnPath Federal Credit Union, we’re committed to helping our members transform their dreams of homeownership into a reality. Our mortgage loans are available with competitive rates and are designed for a diverse array of homebuyers, including first-time borrowers.

If you’re in the Greater New Orleans area and are looking to buy your new home, learn about our attractive mortgage options by calling 800.749.6193.