The homebuying process consists of three stages: preparation, house hunting, and purchasing.

Stage one: preparation — deciding on a lender, goals, your budget, and getting preapproved.

The better your new home fits your lifestyle and budget, the happier you’ll be living there. MSGCU mortgage experts encourage borrowers to sit down and discuss homebuying goals before they move forward in the buying process.

Lifestyle questions to consider:

• Will this be a starter home you plan to sell in 5 to 10 years, or a forever home?
• What things could change in the coming years? Will you start a family or have college expenses?
• Do you want to live near city culture and nightlife, or would you prefer a quiet suburb or rural town? Do you have family and friends you want to stay close to?
• How much of a commute can you tolerate?
• Do you need room for a dedicated home office, a special hobby, or frequent guests?

Make a list of your preferences, then determine which are must-haves and which you could live without.

Now that you have a better idea of your goals, it’s time to learn more about the homebuying process. MSGCU offers a free in-person or virtual Homebuyers Workshop, where you’ll learn the secrets of successful homebuying, from budgeting and preapproval to application and closing. Complete the course and you’ll receive a coupon for $375 off a home appraisal, which is subtracted from your closing costs.

Choosing a lender:

Deciding on a mortgage lender is more than just choosing the lowest interest rate. Consider these questions as well:

• Is the lender local? A local lender like MSGCU knows the area and its real estate market. When you call to ask a question you will talk with our mortgage experts, not a national call center, and you can meet with your mortgage consultant in person. MSGCU takes pride in establishing long-term relationships with our members and we’re always here to help when you need a hand. We also service your mortgage for the duration of your loan, meaning you can always contact MSGCU with any questions or concerns.
• What does this rate include? Interest rates can be lowered by buying “points” upfront. Each point equals 1% of your mortgage (e.g., one point on a $200,000 mortgage = $2,000). When a lender tells you their rate, ask if this rate depends on your paying points upfront. This could make the interest rate seem lower than it really is.

Determining your budget:

There are two costs involved in buying and owning a home: upfront, one-time costs and recurring costs.

Upfront costs will come from your savings, so it’s important to know how much you’ll need ahead of time. Here are some estimates to guide you:

• Down payment: 0% – 20% of the cost of the home. Most lenders offer loans with as little as 3% down. If you’re a first-time buyer, MSGCU offers a 0% down payment mortgage option to help you reach your home goal faster.
• PMI: With most lenders, if you put down less than 20%, you will be required to pay Private Mortgage Insurance (PMI), which protects the lender if you default on the loan. This additional cost is usually added to your monthly mortgage payment.
• Home inspection: The cost of a home inspection ranges from $200 - $600, depending on the size of the home.
• Closing costs: Include legal and administrative fees involved in the home purchase. Closing costs range from 2% to 4% of the purchase price.

In addition to utilities and maintenance, recurring costs include:

• Your monthly mortgage payment
• Property taxes (often added to your monthly mortgage payment)
• Homeowners insurance
• Homeowners’ association fees (charged by some neighborhoods and condominium associations – typically higher for a condominium than for a house)

MSGCU can help you crunch the numbers to determine the ideal budget for your home once you’re ready to start looking.

Preapproval:

Getting preapproved for a mortgage makes you more confident when house hunting and shows sellers that you’re serious about buying a home.

MSGCU offers a True Preapproval, which is a more thorough assessment of your financial situation that will set you up for easier mortgage approval later on. Our Rate Lock and Shop feature also lets you lock in a mortgage rate for 90 days while you’re house hunting.

Stage two: house hunting

Before choosing a real estate agent, do some research online and ask family and friends for referrals. When you’ve decided on prospective agents, ask them these questions:

• How long have you been working in real estate?
• Do you work more often with buyers or sellers?
• How many active clients do you have at once?
• Do you have references I can contact?

Once you choose an agent, give them your list of preferences, and they’ll find listings meeting your criteria. Once you find the right home, your agent will help you prepare an offer. If you’ve been preapproved for a mortgage, your offer will be more attractive to the seller. Once the seller accepts your offer, congratulations! You’re onto the next stage: purchasing.

Stage three: purchasing your new home

Applying for a mortgage:

If you were preapproved earlier, this should make the application process easier. MSGCU doesn’t charge an application fee, but be aware that some banks do. With MSGCU, you can also complete most of the application process online.

The two most common types of mortgages are:

• Fixed-Rate Mortgage: A fixed-rate mortgage has the same interest rate throughout the life of the loan, so your monthly payment will always be the same. Loan terms range from 10 to 30 years.
• Adjustable-Rate Mortgage (ARM): An ARM starts with a lower fixed interest rate which is subject to increases after a certain number of years (e.g., five years). If you are planning to move within this number of years, the lower initial payment can save you money. It could also help you qualify for a larger mortgage.

Home inspection:

Arrange for a home inspection. If you’ve made your offer contingent on inspection, you can change or withdraw your offer if the home inspector finds significant flaws.

Closing:

After you and the seller have agreed on the terms of the sale and your mortgage has been approved, a closing date will be set. On this date, you’ll be responsible for the down payment and other closing costs before you can take possession of your new home. There are a lot of documents to sign, but after the last signature, you’ll be a homeowner! MSGCU guides you through the process and makes sure you completely understand everything you’re signing.

Did we say there were only three stages to buying a home? We almost forgot stage four: the celebration! Take the keys to your new home and get that housewarming party started.

When you’re ready to learn more about buying a home, connect with a friendly MSGCU mortgage consultant by calling (866) 674-2848 or making an appointment at any of our 22 convenient locations in Southeast Michigan. We’re here to help you reach your version of financial success before, during, and after your home purchase.

Category: Finance