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Financial Checklist for First-Time Military Home Buyers

by User Not Found | Dec 21, 2018

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Buying a first home is exciting, but it can present plenty of challenges. We’re here to help you get safely through the gauntlet of what we call the three P’s of home buying: process, practicality and paperwork. To make it easier, we’ve compiled a checklist of how to prepare financially so you can live the home ownership dream.


Get your financial house in order

  • Pay down debt. Reducing debt is a positive step toward a brighter financial future whether you decide to become a homeowner or not. Minimizing and managing down your debt first means you’ll end up with a better debt-to-income ratio (which we talk about more below) when you’re ready to buy.
  • Improve your credit score. Your mortgage interest rate is determined by several variables, including property time, amount down, program and credit score. As a primary driver of the rate you receive, it’s best to have a high credit score for a better shot at a lower interest rate.
  • Save up for a down payment. To avoid private mortgage insurance (PMI), it’s recommended new home owners put 20 percent down for the cost of their new home. For military personnel, VA loans don’t require PMI, even if you have less than 20 percent for your down payment. This translates into significant monthly savings if you’re a VA borrower.

Figure out how much home you can afford

  • Compare your income and debt. Your debt-to-income (DTI) ratio is a critical factor as to whether you’re ready and able to qualify for a mortgage. A DTI ratio is the percentage of income that goes toward paying off monthly debt and helps lenders determine how much anyone can potentially borrow. We offer a calculator to help understand how different factors can affect your DTI. Try it out; adjusting your down payment, home cost, and debt payments so you know what you can afford and still live comfortably. Remember: a good rule of thumb is to spend no more than 30 percent of your income on your home mortgage.
  • Understand all costs. This includes how much cash you’ll need for both the down payment and closing costs. Closing costs range from two to five percent of the total loan and they’re required whether you’re buying a home or getting a mortgage refinance. Down payments can run from zero percent for VA loans up to 20 percent or more. Talk with your lender so you know what to expect, and make sure you receive an outline of all closing costs before it’s time to settle up and settle in.
  • Think long term. The cost of owning a home doesn’t end with a mortgage payment. There are taxes and insurance to cover, elected expenses like furniture or a partial remodel, and costs to maintain the home over time. Some maintenance costs will be easy to anticipate based on the condition, size and age of your home, but others will be a surprise.

Get pre-approved

In a competitive real estate market, particularly at the first-time buyer price point, you’ll want to prove to home sellers you’re a real buyer and that the bank says you’re good for a specific amount. To get started, a bank will require:

  • An LES (Leave and Earnings Statement)
  • Proof of assets
  • Credit score
  • Employment verification
  • Discharge papers, or statement of service
  • If within one year of end of service, an intent to re-enlist

Determine the right loan for you

Loans vary, but your loan officer can help you wade through all the options, including:

They can help you ensure your VA loan eligibility, and walk you through the VA loan process.

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Find your home

Once you’ve been approved for a mortgage loan you can start exploring options in the market you’re interested in most. When examining homes, it’s easy to let yourself fall in love with a place that may be at the higher end of your budget. Try to keep your heart out of it and let your head lead the way as you make what’s likely one of the largest purchase decisions of your life. Whether you’re just dreaming about buying rather than renting, or ready to take the first steps towards homeownership, a clear understanding of what you can afford and how to get the home you want is vital in reaching your goals – and we’re here to help anytime.



 

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