Am I Ready to Shop for a House?

We get it. Shopping for your first home is intimidating. “Can I afford it?” “How much should I save for a down payment?” “What am I even doing”? It’s a lot. But at Superior Choice Credit Union, we’ve been there and we’re here to help! 

Determining a Monthly Mortgage

Let’s walk through it together.

Step 1:

Write down how much your take-home (net) income is every paycheck. If it’s not exact, round it to the closest recurring amount. Multiply that number by two or four, depending if you get paid every week or every two weeks. If you’re going to buy the home with someone else, do the same with their paycheck and add them together.

It is generally recommended by financial institutions, historic trends, and even came from Federal Law back in ‘69, to budget 25% of your income towards housing. So, take the monthly income we just figured out above and multiply by 0.25.

Step 2:

Now we can set a budget for what kind of house you can afford! Using our handy-dandy Mortgage Calculator, adjust the “Loan Amount” until you find a monthly mortgage you can afford! For now, set the “Down Payment” to ‘0’ as we’ll calculate that later, and that could help further reduce your monthly payment. You can also leave the “Interest Rate” and “Loan Term” as-is, as we’re just calculating an estimate we can work with!

Step 3:

Now that we know our budget for a house that we can afford, let’s talk Down Payment. The Down Payment is the upfront amount you chip in for your home. The more you put down, the less you’ll owe—and hitting 20% means you dodge PMI! To find this, simply multiply the cost of the house by 0.2!

Now, 20% can be a lot of money and if that’s intimidating, it’s okay! Take a breath, you’ve got this! 20% is a great goal, but first time buyers can use as little as 3%. Non-first time buyers can use as little as 5%. If you’re a first time buyer, multiply by 0.03. If this isn’t your first rodeo, then multiply by 0.05!

Step 4:

Now that we know what kind of down payment you’ll need (or would like to aim for), let’s talk budgeting! Take the amount you would like to save, subtract what you have saved currently and that tells us what you need to save now. Divide that number by a comfortable amount you could set aside each month and you just figured out how long it will take you to build up your down payment!

Still with us? You’re doing great!

Step 5:

Appropriately, our final step is closing costs; The not-so-fun fees (like appraisal and title insurance) that come with sealing the deal. They usually range from 2-5% of the home’s price. For now, for the sake of setting a goal, let’s use 5%. Multiply the cost of the house by 0.05.

Congratulations! You’ve just taken the first steps towards shopping for your dream home! If it starts to feel overwhelming, pause, take a breath and take little steps! Enjoy the journey, this is an exciting time!

Download our simple “Determining a Monthly Mortgage” Guide to refer back to when you need it and remember: SCCU is here for YOU!