Wednesday, February 1st, 2023

Home Sweet Home: AGCU’s Short Guide to Becoming a Homeowner!

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At AGCU, we know that becoming a homeowner is a rite of passage for many individuals. But, the process can be daunting and complex for a lot of people. It involves making a significant financial commitment and accounting for a range of expenses including mortgage payments, insurance, taxes, and potential repairs or upgrades. 

To help navigate this process we have compiled five home-buying tips you should consider, all coming from industry-recognized experts and researched credible sources. Continue reading below!

Tip #1 – Determine Your Personal Affordability 

Before you begin your home search, it is important to determine what you can afford. A number of factors will influence this decision, including your location, income, credit score, and the size of the down payment you can make.

Investopedia contributor and finance writer Reyna Gobel recommends putting down a 20 percent down payment to avoid paying private mortgage insurance, as this will leave you with a loan that typically covers 80 percent of the home’s cost, which must be paid off over a period of 15-30 years.

When calculating affordability, it is also important to factor in any potential repairs or upgrades that may be needed to the home you are interested in. These expenses may include the following upgrades:

  • Kitchen
  • Resurfacing of the wood flooring
  • Many any other surprises that come up during the buying process.

If you don’t think you’ll be able to afford it, then that should inform you to wait before continuing in the home-buying process.

Tip #2 – Use a Comprehensive Mortgage Calculator 

AGCU offers a mortgage calculator that can help you get a better understanding of what you can afford. To use this tool, you will need to input the following information:

  • The price of the home you are considering
  • The down payment
  • The loan term
  • Either the interest rate or your credit score

The calculator will then provide an estimate of your monthly mortgage payment, which includes the principal and interest, property taxes, and homeowners insurance. While this is not a guarantee of what you will be approved for, it can be a good starting point, especially if you are unsure of your budget.

Tip #3 – Thoroughly Research the Local Housing Market 

Timing is also important when it comes to purchasing a home. Mortgage rates can fluctuate throughout the year, so it is important to be aware of when interest rates are low and when prices are expected to rise. 

According to Gobel, the spring is often the best time to shop for a home, as many people are waiting for the school year to end before making a move. On the other hand, the fall is often the worst time to buy, as many people have already settled into their new homes.

Regardless of what time of year you decide to buy a home, make sure that your research accurately reflects that of the local area. Don’t make the mistake of making inaccurate comparisons. 

Tip #4 – Considering All Your Housing Options 

Before making a final decision, it is important to consider all of your housing options and assess whether homeownership is the right choice for you. Part of your personal assessment may involve the following:

  • Creating a budget
  • Looking at your debt-to-income ratio
  • Considering all of the costs associated with homeownership.

After your assessment you may realize that renting is still your personal best option. Gobel suggests doing the math before making a final decision, and recommends subtracting the cost of your most expensive hobby or activity from your estimated monthly mortgage payment. If the balance is not enough, you may need to cut back on your spending or look for a less expensive home.

Tip #5 – Really Understand Home Loan Options

There are several home loan options available to potential homeowners, including fixed-rate loans, adjustable-rate loans, and FHA loans. These loans have varying interest rates, credit score requirements, and loan terms, so it is important to do your research and choose the option that is right for you. Additionally, it is important to consider your credit score, as this will influence your interest rate and your eligibility for certain types of loans.

Summary of Things to Consider for Home-Buying Readiness

At AGCU, we know homeownership is a major milestone and the journey towards it can be overwhelming. We hope our guide provides a roadmap for aspiring homeowners, starting with determining affordability and using a mortgage calculator to estimate monthly payments. 

Keep in mind that timing is extremely important in the home buying process, with interest rates and expected future home prices to keep in mind. Considering all options and weighing the costs of homeownership is crucial before making a final decision. 

Lastly, exploring various home loan options (with their different interest rates), factoring in credit score requirements, and understanding loan terms is necessary to finding the right fit. With keeping these tips in your mind, the journey towards homeownership can be a well-informed and successful one.

Learn more about Home Loans with AGCU, begin the Apply now, or contact our mortgage professionals at 866-508-2428, email mortgages@agcu.orgfor more information

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