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4 Steps Home Buyers Should Take Now

Whether you're looking to purchase your first home or your third, the process can be overwhelming. Buyers need to understand what you can afford up front, and how to get there, as we head into the busy home buying season.

Do Your Homework on Home Loans

Today, many sellers won't even accept an offer unless you've been pre-approved for a mortgage. Do your research on different types of home loans to determine which option best meets your needs.

Work with a trusted lender to help you understand the difference between available fixed-rate mortgages and adjustable rate mortgages (ARM) and what makes the most sense for you.

With either type of loan, look out for fees such as discount points, origination fees, and closing costs. It's important to make sure everything is disclosed up front to avoid any unpleasant financial surprises.

Strengthen Your Credit Score Now

A healthy credit score positions you for better options in the long run.

If your credit score isn't as high as you would like, pay off credit card balances in full and stop using them a few months before applying for a mortgage. You should also avoid applying for new credit until after you've closed on a home. Do not close your revolving credit lines as that could hurt your score – instead, pay them down and use them every so often.

Some first-time buyers may not have a solid credit history. We see many first-time buyers whose credit is in their parents' names. Ideally, you should build up at least 12 months of your own credit history with at least three credit lines.

Calculate Your Debt-to-Income Ratio

You should have positive cash flow, meaning you're bringing in more income than you're spending on debt. Your debt-to-income ratio will help to determine what you can afford for a mortgage.

Your lender will help you determine how much you can afford and steps you may need to take to improve your credit. But while a lender can give you an idea of how much you can borrow, you should create a budget to decide what you're comfortable spending.

Save Up (a little) for a Down Payment

There are a lot of misconceptions about down payments, which have discouraged some people from taking the plunge to buy their first home. While some believe they need 20 percent of a home's purchase price for a down payment, there may be alternative options available for 100% financing or reduced down payments.

Now get shopping!

There are many factors to consider when making the decision to purchase a home. It's important to work with people you trust and who will guide you through the process. For more information about the types of home loans NECU offers, visit

We're more than a mortgage, we are your partner.