Are You Ready to Buy?

ARE YOU

READY

TO BUY? MORTGAGE PREP www.churchillmortgage.com

CONTENTS

TABLE OF

1 Introduction 2 Your Mortgage Payment 4 Location Matters 5 Budgeting Monthly Housing Costs 7 Home Prices 8 Down Payment 9 Credit Score 10 Your Timeline

ARE YOU READY TO BUY? MORTGAGE PREP Whether you are currently renting or are a current homeowner and looking to buy a new home, it’s important to know if it makes sense for you to buy right now. Deciding to buy depends on a variety of things including market conditions, monthly expenses, credit score, and down payment.

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YOUR MORTGAGE PAYMENT When you get a mortgage to buy a home it’s important to understand the breakdown of your monthly statement. This will help you keep track of your finances, and to help you figure out your timeline of when you should be able to pay off your home loan. The four basic elements of a monthly mortgage can be easily remembered using the anacronym PITI: •Principal: This is the total amount of money you’re borrowing. As mortgage payments are made, the principal is reduced. Besides paying your mortgage on time there are other ways to reduce your principal like making one additional payment each quarter (or per year). Just make sure you specify your extra payment is mean to be put only toward the principal.

•Taxes: Each year your property will be assessed for tax purposes and a payment is due. Keep in mind, taxes are not based on market values only assessed values set by a property assessor who will tell your local government what your property is worth. Many people choose to include their property taxes in their monthly mortgage payment. The taxes will be held in your escrow account until taxes are due and then paid on your behalf.

•Interest: The interest rate on your loan is dependent on what’s going on in the market at the time your loan is secured. It can also be impacted by your personal credit history and other factors like down payment amount, loan term, and loan amount.

•Insurance: Home insurance helps protect your home in the event of a disaster or accident (like a fire, tornado, or hail). Your homeowner’s insurance can be divided into 12 payments and held in your escrow account until due to be paid directly to your insurance company.

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Depending on your situation and loan type, you may have additional requirements added to your monthly mortgage payment like Private Mortgage Insurance (PMI) or Mortgage Insurance Premium (MIP). PMI: If you don’t put 20% down when you purchase your home with a conventional loan, you’ll be required to pay Private Mortgage Insurance each month. PMI drops off automatically when your mortgage balance reaches 78% on your primary residence. You may request removal of PMI at 80% of your balance but you’ll need to first have your home appraised. Remember, if you miss any mortgage payments it may be harder to remove PMI at 80%. MIP: If you get an FHA loan, the insurance structure is a little different. Since the down payment on this type of loan can be as little as 3.5% of the total purchase price, Mortgage Insurance Premiums are required for all FHA loans. MIP is calculated every year and is paid once a month.

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LOCATION MATTERS The location of a home plays a critical role on your day-to-day life as well as your financial investment. Here are six things to think about:

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Property Value: The location of a home has a direct impact on its value. Homes in desirable and safe neighborhoods or areas with great amenities and schools tend to appreciate in value over time. Resale Value: A home in a sought-after location is likely to have higher demand when it’s time to sell. Schools and Education: If you have children or plan to in the future, the quality of the nearby schools is important to both you (and for resale). Living in a good school district provides better educational opportunities and homes in such areas are often in high demand. Convenience and Access: The location of your home can impact daily life if you commute to work. A shorter commute can save you time and help reduce stress. It’s also helpful to be close to grocery stores, healthcare facilities, and banks. Lifestyle and Amenities: Choosing a location that aligns with your preferred lifestyle and interests makes your day-to-day more enjoyable. When narrowing down a location, think about if you want to be close to parks, shopping centers, restaurants, and recreational facilities. Residential Zoning and Regulations: Different areas may have different zoning regulations and building codes. If you’re thinking about making renovations or building additions, it’s important to check what you’re allowed to do with the property before purchasing.

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BUDGETING MONTHLY HOUSING COSTS Budgeting for costs outside of your monthly mortgage payment is essential to home buying success. Let’s cover the basics of budgeting and how you can pinpoint a house payment that works for you to ensure you’re not getting in over your head. Figure out how much house you can buy (without going broke) by budgeting. A budget is just a plan dealing with three things—income, spending, and spending. Since spending and income rarely stay the same all year, you’ll want to make a budget for each month.

Making a budget is easy: 1. List your income. Make sure to record your take-home pay, not your gross income. Don’t forget to include money from any part-time, seasonal, or side hustle jobs.

3. Make sure everything adds up to zero. The idea here is to track all your spending. Income minus expenses and monthly savings goal should equal zero.

2. Jot down your expenses. It’s also a good idea to put them into categories such as, utilities, debt, savings, etc. Subtract your expenses from your income.

4. Pay off debt. If you finish your budget and have money left over, use it to pay off some debt or move it to an additional savings account.

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Give Your Mortgage a Test Drive If you want to see what your monthly mortgage payment means for your lifestyle, we recommend you give it a try first. Think about your current rent or mortgage payment. If your new loan amount is going to be higher, put the difference into a savings account on the first of the month to simulate making your new mortgage payment. Once you’ve test driven your estimated payment, ask yourself these questions: •Are you able to make the payment work? •Are you giving up anything to make the payment? •Could you continue to make that sacrifice long-term? •Do you have enough money left over in your budget to enjoy your home and desired lifestyle? If you’re good to work and everything falls into place, congrats! You now know you can handle the new monthly payment without any issues and you’re ready for your new mortgage.

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HOME PRICES The price of a home is an important factor when looking to buy. This helps determine financing options, home affordability, down payment options, and long-term financial stability. Here are four reasons the price of a home is important:

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Affordability: The price of a home helps to determine if you can afford to buy it. Your budget, income, and savings also help influence the price range to consider. Investment Potential: The price you pay for a home can impact your potential for future gains due to price appreciation. Down Payment: The price of a home impacts the size of a down payment you need. For example, a higher-priced home typically requires a larger down payment. In general, your down payment amount can impact your mortgage terms and possibly lower your mortgage payments if you do not have to pay mortgage insurance. Size of Mortgage: Home price is one of the factors that will determine the size of the mortgage you’ll need.

DOWN PAYMENT The down payment on your home will not only help you pay less interest overall but can help you build long-term wealth. But not all down payments are created equal. In fact, they’ll vary based on your loan type. While 20% is considered the ideal down payment, it is not necessary to start building equity through homeownership. The most important thing is to choose a mortgage plan based on your goals and current financial situation. Here are the minimum down payments for different types of home loans:

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CREDIT SCORE People ask us all the time if a credit score really matters. In short, yes. The longer answer is, it depends. Your credit score helps determine loan eligibility, down payment requirements, interest rates, and loan terms. If you have a credit score and it’s in the “very good” to “excellent” range, you will have access to better interest rates, lower monthly payments, and more purchase power. If you have no credit score, this means you are credit invisible or have a credit score of 0 with the three credit bureaus. Most lenders do not offer loans without a credit score, but Churchill Mortgage accommodates this type of loan on a regular basis with expertise. If you have a low credit score, a no score loan will not work for you. A low score doesn’t always mean you haven’t paid your bills on time. It could mean you’re still building up credit, or if you’ve recently paid off (and closed) your credit cards and are slowly moving down to a 0 credit score. If you’re looking for ways to improve your credit score, here are three options: 1. Check your credit report on freecreditreport.com and scan for any errors. 2. Check your budget. Look at what’s coming in vs. what’s being spent. You can then cut costs in areas and put that money toward paying down debt, if necessary. 3. Make payments on time, even if they’re the minimum amount. Improving your credit score takes time, but Churchill can help you find the right mortgage plan for you, even if you’re working on your credit.

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YOUR TIMELINE Establishing a timeline helps you plan and organize the stages and tasks when buying a home. In addition, here are three additional advantages to help you make informed decisions and achieve your goal of homeownership:

1 Coordination with Your Home Buying Team: Knowing when you’re wanting to buy will help you and your home buying team get on the same page. It’s important for your Home Loan Specialist, Realtor, and other professional aware of any upcoming milestones and to help you get into the home of your dreams.

2 Goal Setting: A timeline helps you set specific goals for each stage of the home buying process. It’s important to discuss both your short- and long-term financial goals with your Home Loan Specialist to make sure you are on the smartest mortgage plan for your unique situation.

3 Budget Management: With a timeline in place, you’re able to allocate funds to different stages of the home buying process. This can ensure you have enough resources for closing costs and once you start paying your monthly mortgage payments.

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What’s next? Go to www.churchillmortgage.com/are-you-ready-to-buy and take our Ready to Buy Quiz! Once you get your Readiness Report, you’ll know your next steps and how to move forward.

What is your budget? How Much Consider

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NEED MORE INFORMATION?

Just reach out to your local Home Loan Specialist 888.562.6200 churchillmortgage.com

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