Steps to Homeownership

Steps to Homeownership

By: Andy Pallissard

Loan Officer at HomeStar Bank & Financial Services

Buying a home is still recognized as a good, long-term investment. If you hope to become one of the millions of Americans to own your home, here are some steps you can take to be prepared for that great opportunity. 

Credit Report

The first step is to obtain a copy of your credit report. A credit report reflects all of your current and past creditors, residence and employment, your name, social security number, credit score and more. The higher your credit score, the better chance you have of getting a loan. 

To build a good score, pay your loans, credit card payments, and all your reoccurring bills on time. Avoid letting any of your bills go into collection or to court for judgments. To clean up your credit report, make arrangements to pay off the outstanding debts. A clean credit report makes you a more attractive loan applicant.

Budget

The next step is to develop a budget. Identify monies coming in and going out, including savings. Now, calculate what you can afford for a monthly mortgage payment. 

Before you head off to a HomeStar Branch to apply, it is important that you understand a few of the terms related to mortgages. 

What makes up your monthly mortgage payment?

  • Principal: The amount borrowing for the home;
  • Interest: The cost of borrowing money;
  • Escrow: A separate account established to pay property tax and insurance during the term of mortgage. 
  • Private Mortgage Insurance (PMI): Usually required if the down payment is less than 20% of the sales price or appraised value, whichever is less. Once the principal is reduced to 80% of the original value, the PMI is often no longer required.

What’s the difference between fixed, adjustable, and balloon mortgages?

  • Fixed Rate Mortgage: The interest rate does not change for the entire loan period.
  • Adjustable Rate Mortgage: A fixed rate for the first 3, 5, or 7 years, then the interest rate adjusts annually.

Try our mortgage calculator on our website at www.HomeStarBank.com/loans.htm.

Pre-Qualifications & Pre-Approved

Now that you are armed with your credit information, a budget, and loan terminology, you are ready to visit the closest HomeStar Branch office and start the process of becoming pre-qualified or pre-approved for your home loan.

  • Pre-Qualification: The process of confirming your budget with your banker to determine how large of a loan you may qualify for and what home price you can shop for.
  • Pre-Approval: Mark Kaner, Andy Pallissard, or another HomeStar Loan Officer has evaluated your income, credit and down payment to provide you with a written approval to use in making an offer for your new home.

Try our online loan application on our website at www.HomeStarBank.com/online-loan-application.htm.

Homeownership

Once you have read these you are ready to hit the streets with your realtor and start shopping for your new home! Good luck and call us at (815) 468-2265 if you have any questions.

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