Portrait of a joyful couple in their new house with woman showing the key

Buying your first home is the one of the most rewarding experiences of your life. Before you begin the process though, there are some things Community Bank of Oak Park River Forest would like you to keep in mind.

Know Your Credit Score
Your credit history is extremely important when applying for a home loan, so be sure to review your credit reports and know your credit score. Keep in mind that your credit score may change during the loan application process. We recommend that you refrain from applying for any credit cards during the application process, as that may lower your credit score. Also be sure to request a free copy of your credit report from annualcreditreport.com.

Pay Your Bills On Time – NO LATE PAYMENTS!
Paying your bills on time shows you are a trustworthy loan applicant. However, if you are late paying your bills, your chances of receiving a home loan diminish. Be sure to pay your bills on time, both before and especially during the home loan application process.

Avoid Racking Up Credit Card Debt
It is important to pay down your credit card debt prior to applying for a loan. You should also avoid racking up credit card debt during the application process. Keep a low ratio of debt to credit limit, and don’t max out your credit cards, especially during the home buying process. The more credit card debt you have, the more difficult it will be to obtain a home loan.

Save Your Money
The more you save ahead of time, the better. Experts typically suggest that you save at least 20 percent of the home’s purchase price as a down payment. Of course, there are many loan options that allow you to purchase a home with less than 20 percent down. But, by paying 20 percent you will be able to avoid paying private mortgage insurance. This will help you save money in the long run.

Understand PMI – Mortgage Insurance
If you are unable to put down 20 percent or more towards the purchase of your new home, you may be required to purchase Primary Mortgage Insurance (PMI). The PMI payment is usually paid monthly as part of the overall mortgage payment to the lender. PMI is the lender’s protection in the event that you default on your primary mortgage and no longer make payments.

Remember to Estimate Closing Costs Into the Price
When purchasing a home, you will need to pay closing costs. Closing costs are fees charged by the lender and other third parties which relate to the purchase of the home. Closing costs can vary depending on the property you purchase, your location, or who you’re working with to purchase the home. Closing costs often include loan origination fees, attorney’s fees, appraisal fees and home inspections costs. Be sure to understand these fees ahead of time.

What is PITI?
A mortgage payment usually includes the following four components: Principal payment, Interest payment, property Tax payment, and Insurance payment. Be sure to factor in these four components when determining how much you can afford to pay on a monthly basis.

Homeownership Counseling Programs
Depending on the type of loan you choose, you may be asked to attend a homeownership counseling program. These programs may be offered in person or online. Counselors provide information and advice on buying a home, how to prepare yourself financially as well as how to avoid certain home ownership pitfalls. Government assistance programs will require you to attend the program.

What is a Home Inspection?
A home inspection helps protect you against pre-existing problems with the home. For example, if the roof is crumbling or there’s a problem with the foundation, a home inspector should find the problem. The home inspector will examine the conditions of the home’s major systems, and the cost of the home inspection is usually part of the closing fees. A home inspection may be important in helping you to determine if your offer price should be reduced to cover your future repair expenses.

Save, Save and Save Some More!
As a first-time home buyer, you will need to pay for repairs and updates to your new home. Need to fix a leaky sink? You’ll have to pay for it yourself. Is your refrigerator on the fritz? You’ll have to pay for it yourself. Did a family of raccoons take residence in your attic and you need to hire an exterminator? You’ll have to pay for it yourself. As a former renter, you’ve probably never had to pay for general upkeep and repairs. Either your landlord handled things, or you turned to your family for help. As a new homeowner, keep a separate fund for unforeseen problems, which will undoubtedly happen.

What About Condos?
A condo is a great option for a first-time home buyer, but there are some things you should keep in mind. If you’re buying a condo, you’ll have to pay monthly association fees in addition to your monthly mortgage. Also, you may need to be personally approved by the condo association, which will require a face-to-face meeting. There are also bylaws to consider, which are the rules and regulations condo owners need to follow. If purchasing a condo, you will likely need to provide a copy of the bylaws to your lender.

What About Homeowner’s Insurance?
Homeowner’s insurance pays for losses and damages to your property if something bad happens like a fire or burglary. Homeowner’s insurance is often required and your lender will probably want to make sure your property is protected. Whether you’re buying a house or a condo, you will need to consider the cost of homeowner’s insurance when determining your monthly budget.

Remember, Help Your Lender Help You!
Be responsive in providing documents such as tax returns or bank statements. The more responsive you are, the better the home buying experience. If you are interested in purchasing a home, or have questions, please call Claude with Community Bank of Oak Park River Forest at 708.660.7006 or email claudel@cboprf.com.

Community Bank of Oak Park River Forest – NMLS# 288792, Claude L’Heureux – NMLS# 802841
Member FDIC | Equal Housing Lender