1. Get Prequalified

The Prequalification process

Once you decide it’s time to start looking for your first home, contact Rio Grande Credit Union and meet with a mortgage loan officer for free prequalification. We’ll help figure out your price range and which loan program works best for you based on where you’re at financially. We’ll talk about:

• Your credit history. The higher your credit score, the lower your interest rates and closing costs. We’ll look at your credit report together and determine your next best step. And if your credit isn’t where it needs to be, we’ll help you make a plan to improve it.
• Income, assets and liability. We’ll look at how much money you have coming in and how much is going out, plus any savings or debt, and show you the loan options that make the most sense for you.
• Down payment. You could make it happen with as little as 3% down. On the other hand, a greater down payment has advantages. Like paying less Private Mortgage Insurance (PMI), which reimburses us if you default on your loan. A bigger down payment means you can stop making PMI payments sooner.

What you'll need for prequalification

Tax returns

We will need to get the full story of your financial situation. You’ll need to sign a Form 4506-T, which allows us to request a copy of your tax returns from the IRS. We will ask for two years’ worth of tax returns. This is to make sure your annual income is consistent with your reported earnings through pay stubs and there aren’t huge fluctuations from year to year.

Pay stubs

W-2s or other proof of income. We will ask to see your pay stubs from the past month or so. Your tax returns help give us a clear idea of your overall financial health, while pay stubs help us gauge your current earnings. If you’re self-employed or have other sources of income (such as child support), you may need to show proof through 1099 forms, direct deposits or other means.

Bank statements and other assets

When assessing your risk profile, we may want to look at your bank statements and other assets. This can include your investment assets as well as your insurance, such as life insurance. This is to make sure you have several months’ worth of reserve mortgage payments in your account in case of an emergency. We also check to see that your down payment has been in your account for at least a few months and did not just show up overnight.

Credit history

In order to assess you as a borrower, we will pull your credit report — with your written permission. You may need to explain any blemishes on your credit report.

Gift letters

Your friends and family might help you buy a house by giving you money. If that’s the case, you’ll need to provide a written confirmation the money is indeed a gift and not a loan. The documentation should list their relationship to you as well as the amount of the gift.

Photo ID

You’ll need to provide a photo ID, such as a driver’s license. This is simply to prove you are who you’re claiming to be.

Renting history

For buyers who don’t already own a home, we will request proof that you can pay on time. We may ask for a year’s worth of canceled rent checks (check that your landlord has cashed). Or, we may ask your landlord to provide documentation showing that you paid your rent on time. Your renting history is especially important if you don’t have an extensive credit history.

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Why Get Prequalified?

When it's finally time to make an offer on a home, a prequalification is key. It shows the maximum purchase price you're prequalified for and give you more credibility than other potential buyers who aren't yet prequalified.

2. The Search Begins

Ready for the fun part?

Once you’re prequalified, it’s time to go house hunting. You should consider having an experienced Realtor at your side. They will make the process easier, and it could save you a lot of money, too. A real estate agent will help you understand:

• What kinds of homes realistically match both your budget and your taste.
• The best neighborhood fit for you and your family.
• How to strike the right balance between your must-haves and wish-fors. What’s more important: a finished basement or some extra kitchen counter space?
• The formalities that come with purchasing a home. The last thing you want to get hung up on is complicated paperwork. But with the help of Summit and your real estate agent, you’ll have nothing to worry about.

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Some things to consider

Before you make any big decisions, giving the following some thought could save you a lot of money and an entire home’s worth of headaches.

• Take your time. It’s tempting, we know. But don’t start looking for a home until you know your budget. Nothing turns “cozy” into “cramped” like seeing homes outside of your price range.
• Understand the costs. All of them. Your total monthly mortgage payment is made up of four factors known as PITI: principal, interest, taxes and insurance. It’s important to add them all up when thinking about the monthly payments you’ll be making.
• Don’t buy the nicest house on the block. Affordable homes in desirable neighborhoods are more likely to increase in resale value, which can help you build equity down the road. An experienced Realtor can help you decide which homes to pass on and which ones to jump on.
• Resist the urge to splurge. Once you’ve gotten final loan approval, avoid any major purchases. Changes in your credit score before closing can put your loan in jeopardy, so hold off on the shiny appliances and comfy couch until after closing day.

 

 

3. The Home Stretch

 

Make your offer.

You’ve done your homework, gotten prequalified and found the perfect home that fits your budget and your style. Your Realtor will help you make a formal “offer to purchase,” which is the purchase contract signed by both the seller and the buyer.

Finalize your loan.

Once your offer is accepted, we can get started on approving your loan. We’ll set up an appraisal to make sure the price you’re paying for the home is reasonable, arrange for title insurance and process and underwrite your loan request so it’s ready for closing.

In the meantime, you can go figure out which friends are going to help you with the move. Chances to cash in on friend karma don’t come along every day.

Close on your home.

While your Realtor sets up an official closing date and time, you can start shopping for homeowner’s insurance. You’ll need to show proof of homeowner’s insurance at closing.

Then comes everyone’s favorite part, the big finale – a stack of paperwork to seal the deal. But at least you’ll be signing with a smile, knowing that the keys to your new home are just a few autographs away!

Moving day!

The hard work is out of the way. Give yourself a pat on the back for navigating the homebuying process with ease and moving into your very first home!

Now, tell your friends to get over there and help you squeeze all of your furniture through the front door. Pro tip: lift with your legs, and take a few breaks along the way to appreciate your new digs!