First-Time Homebuyer

Before You Buy

Your home is likely one of the largest purchases you’ll ever make. As such, it deserves careful consideration and planning. To help you prepare and secure more favorable outcomes, walk through these three questions well before filling out your mortgage application.

What’s Your Debt-To-Income Ratio?

Your debt-to-income (DTI) ratio is an important figure to lenders. It compares your total monthly minimum debt payments — including your potential new mortgage payment — to your total monthly pre-tax income. In addition, they’ll look at your mortgage-to-income ratio. That’s your expected mortgage payment divided by your total monthly pre-tax income.

Both ratios help determine whether your income can handle the additional obligation. Studies have shown that borrowers with a higher DTI are more likely to struggle with mortgage payments.

What’s Your Credit History?

Credit history is a critical part of a mortgage application. Underwriters look at both your credit report and credit score when making a lending decision.

Credit Report

Think of your credit report like a financial report card. It displays your borrowing history and summarizes how you manage credit. If you’re like most Americans, you haven’t pulled your credit report in over a year. If that’s the case, you’ll want to do that soon, as mortgage decisions are based heavily on your credit history.

Through the Fair Credit Reporting Act, you have the right to access a free credit report annually from each of the three reporting bureaus – Equifax®, Experian™, and Transunion®. You can do so by visiting the government-sponsored site, annualcreditreport.com. Pull all three at the same time or space them out.

Credit Score

If your credit report is like your financial report card, your credit score is like your financial GPA. It takes information from your credit report and calculates a score that predicts the likelihood of you paying back on time. Scores typically range from 300-850, with higher numbers indicating less risk to lenders.

Credit scores are generally based on five major factors: payment history, amount owed, length of credit history, new credit, and types of credit. Each factor is weighted differently when calculating your score; the ones with the greatest influence are payment history (35%) and amount owed (30%).

What’s Your Budget?

The last thing you want is to overextend yourself. Before you buy, figure out how much you can afford. Use the Monthly Payment Worksheet from the Consumer Financial Protection Bureau to:

• Assess current income, spending, and savings
• Estimate your financial responsibilities as a homeowner
• Determine how much of a monthly payment you can afford

Buyer Resources

The Consumer Financial Protection Bureau (CFPB) is a government agency that was formed in 2011 to protect the finances of consumers. Today, the CFPB is one of the most trusted providers of financial education.

The CFPB developed an easy-to-understand resource to help explain the ins and outs of the homebuying process, how to choose the best loan for your situation and goals, how the mortgage closing process works, and more.

Download The Toolkit

Mortgage Documents

As you move through the mortgage process, there’ll be many documents for you to review and sign. These documents contain a lot of important information that you need to be aware of, so pay close attention.

We’ll go over two standard documents all lenders must use to make it easier to compare loan options.

Additional Closing Documents

In addition to the Loan Estimate and the Closing Disclosure, there will be more paperwork to sign at closing. Here are some of the most notable.

Mortgage Note

This is a legally binding document you sign promising to repay your mortgage. A Promissory Note, which summarizes how you need to pay the loan back, often accompanies it.

Included in the Promissory Note:

• Loan details, including the loan amount, interest rate, payment due date, time to repay, and payment instruction
• Consequences of being late on your payment

Deed Of Trust/Security Instrument

This document restates information on the Promissory Note and explains your responsibilities and rights as a borrower. Upon signing this document, you give the lender the right to take your property by foreclosure if you fail to repay your mortgage as agreed.

Initial Escrow Disclosure

This disclosure indicates how much you’ll pay into escrow each month as part of the mortgage agreement. It also shows how funds will be applied to insurance and taxes.

Applicant Checklist

Buying a home is a big step that you don’t have to navigate alone. A+FCU can help whether you’re ready to buy or are only interested in seeing what you can afford. Submit your loan application and a mortgage expert will reach out to answer questions and discuss options.

To expedite your A+FCU mortgage application, gather your paperwork ahead of time. Below is a list of supporting documents you may need to provide; additional supporting documents may also be requested at a later time.

Helpful Tips

• Double-check the dates on all documents to make sure they meet the required timeframes
• Make sure ALL pages are included for each set of documents
• If you filed your tax returns electronically, look for a copy from your tax software, or ask your tax preparer for a copy

Membership required. Programs, rates, terms, and conditions are subject to change without notice. Normal lending criteria apply. All loans subject to credit approval. Property must be located in Texas and primary owner-occupied single family residence. NMLS #405608.