Play Banzai, the free financial education program that makes it fun to learn about budgeting, paying for college, saving for a home and paying off debt.
Buying a home is an important step on the path to financial security. Paying a mortgage helps you grow wealth in three ways:
Build equity in your home.
As you make payments, the equity in your home increases. You can use your home's equity to secure funding for home improvements, consolidate debt and cover medical expenses, among other things.
Reduce your federal income tax burden.
By paying mortgage interest, you may be able to deduct some of the costs of homeownership.
Show financial gain resulting from your home's increase in value.
Home values fluctuate by location. Over time most home values increase (or appreciate) at an average of 3% to 5% annually.
Purchasing property isn’t just about growing wealth. Here are some non-monetary benefits of homeownership:
Freedom to paint, decorate and remodel as you choose
No accountability to a landlord
Build a lifetime of memories
Buying a home is a big leap! Our mortgage specialists will guide you through your homebuying journey from start to finish by helping you:
Get preapproved.
Explore mortgage options.
Calculate a down payment.
Determine the home price you can afford.
Navigate the loan process like a pro.
We’ll be there to answer your questions, send updates and make the process as easy as possible.
CHAPTER 1
Getting preapproved
The best time to get a preapproval is the minute you are considering becoming a homeowner. A preapproval requires:
Talking with a lender
Providing documentation of your income and assets, including:
Recent pay stubs
Tax returns
Bank and investment account statements
Discussing your job history and obtaining a credit report
IF YOU’RE BUYING A HOME WITH YOUR PARTNER OR A RELATIVE, THAT PERSON SHOULD ALSO BE PREAPPROVED.
A mortgage preapproval can make your homebuying process much smoother in several ways:
Your lender can give you tips on how to improve your credit score.
Your lender will tell you the maximum loan amount you can borrow. Knowing your price range before falling in love with a house will help you shop smarter.
A preapproval letter from Mountain America can lead to a successful purchase agreement.¹ When you make an offer, most sellers require proof of your ability to pay for the home before they sign a contract.
How much can you afford?
Think about how much you’re comfortable spending monthly on housing based on your current budget.
Consider financial decisions that may not show up on your credit report (plans to work fewer hours, recreational items, etc.).
If you have good credit and cash reserves, some lenders may qualify you for a slightly higher loan amount.
Rule of Thumb
Ideal housing cost = Maximum of 35% of your gross monthly income.2
EXAMPLE:
Annual income = $50,000 ($4,166/month) $4,166 x 0.35 = $1,458 maximum mortgage payment
Estimate your loan payment using Mountain America's mortgage calculator.
Your credit score is the most common tool for determining your likelihood of repaying your home loan. It reflects your credit lines and limits, balances, minimum payments and payment history. A good credit score opens up more loan options for you, often with lower interest rates. A lower credit score typically results in fewer loan options and higher interest rates.
Credit reports are generated by:
Experian®
Equifax®
TransUnion®
You can request a free credit report from each agency annually at annualcreditreport.com.
Scores for the lowest interest rates:
740-850
Lowest score for mortgage approval:
620+
Mountain America provides personalized, professional advice to help you improve your credit score.
Ways to raise your score
Pay down your credit card balances.
Bring late accounts up to date.
Pay off any fees.
Pay all your bills on time—at least the minimum payment.
Keep your oldest credit line open. Closing accounts reduces available credit and removes a long payment history.
Avoid applying for new credit other than a mortgage.
How much cash will you need?
CLOSING COSTS
2%-3%
Closing costs should be 2% to 3% of the home price. You can often negotiate with the seller to pay closing costs, but set aside that amount in case you need it.
REPAIRS & MAINTENANCE
1%
For repairs and maintenance, expect to pay 1% or more of your home's value.
UNEXPECTED COSTS
3-6 months
Save three to six months of mortgage payments in case of an unexpected financial crunch.
First-time homebuyers have loan options with zero or low down payments. Your mortgage specialist can help you determine which loan program is best for you.
CHAPTER 2
Finding the best mortgage for you
Mountain America mortgage specialists are happy to meet with you to discuss the best loan options for your circumstances.1 There are a variety of mortgages available to homebuyers, including:
100% FIRST-TIME HOMEBUYER LOAN
Loan amounts up to $645,200
As little as $1,000 cash down
No private mortgage insurance (PMI protects the lender in case of default—required when buyers make a down payment of <20%)
CONVENTIONAL LOAN
Usually limited to $806,500
Available with fixed or adjustable rate
Down payment as low as 5% (PMI required but will be eliminated once you meet certain conditions)
FHA LOANS
Down payment of 3.5% (can come as a gift from a relative)
Less restrictive credit guidelines (good for borrowers with less-than-perfect credit)
Mortgage insurance required for the entire loan term
UTAH AND IDAHO HOME LOAN PROGRAMS
Loans for properties located in one of these states for borrowers with low to moderate income
Amounts may vary, depending on location
CONSTRUCTION LOANS
One-time or two-step closing options for homebuilders
Up to 90% financing
Available with fixed or adjustable rate
12- or 18-month construction period
LOT LOAN
Provides up to 80% financing for 10 years or 20 years with a 7-year balloon
Can be refinanced into a construction loan
VA LOAN
For eligible veterans
No down payment or mortgage insurance
Available with fixed or adjustable rate
JUMBO LOAN
Used to buy a more expensive home—more than the conforming loan limit (usually $806,500)
Borrow as much as 95% of the sales price
Available with fixed or adjustable rate
Minimum credit score of 680
CHAPTER 3
Finding the right real estate agent for you
Buying your first home works best as a team effort:
You
Your lender
Your real estate agent
Title company
Home inspector
Home appraiser
Your real estate agent relationship will impact every part of your homebuying experience, so talk to several agents until you feel confident you’ve found the right one. The right person will represent your interests and help you find the right home for your needs and budget.
Choosing the right professionals for your homebuying journey can make the difference between a smooth transaction and a stressful one.
HOW ARE REAL ESTATE AGENTS PAID?
Real estate agents typically receive a commission at the loan settlement, so homebuyers essentially have free representation.
HOW DO I FIND A REAL ESTATE AGENT?
Ask for recommendations from family, friends and coworkers, or look for a real estate agent who works with homebuyers in your preferred neighborhood and price range. Some real estate agents have first-time homebuyer expertise and will take the time to broaden the search parameters and narrow the priorities.
HOW DO I CHOOSE THE RIGHT AGENT?
When you decide on a few potential real estate agents to work with, ask the following:
Are you a full-time real estate agent?
Do you often work with first-time homebuyers?
What price range do you typically represent?
How many sales transactions did you close last year?
Can you help me evaluate the work and expenses of a fixer-upper?
How often will I hear from you while we’re looking for a home?
Can you describe the homebuying process and the role you’ll play?
Will you be present when I close on a home?
CHAPTER 4
What to do when you find the home you want
When you have your mortgage preapproval and have found the property you hope to purchase, it’s time to make an offer.
Here’s how the process works:
Work with your real estate agent to determine an appropriate offer.
This is based on local market conditions, home conditions and other factors.
It will likely include contingencies, like a home inspection and appraisal.
Write a home purchase agreement and offer an earnest money deposit.
The deposit will be kept in an escrow account and used as part of the down payment.
The deposit may be forfeited if you don’t follow through with obligations in the final purchase agreement.
The seller accepts, rejects or counteroffers.
An unlimited number of offers and counteroffers can be made until a final agreement is reached or one side walks away.
BUYING AND SELLING AGENTS NEGOTIATE:
Which items are included with the home
Date of the settlement
Earnest money deposit
Purchase price
Ask your real estate agent to recommend a home inspector.
Always have a home inspection.
Attend the inspection to learn more about the home’s systems and how to maintain them.
You can negotiate with the seller (through your real estate agent) to fix any issues found.
You can also negotiate a price reduction to make repairs once you own the home.
Mountain America will hire an appraiser to value your home.
An appraisal ensures you don’t pay more than the property is worth.
If your contract is contingent on an appraisal and the value is lower than the agreed-upon price, you can renegotiate the contract or be released from it and get your deposit back.
If the appraisal is higher than the contract price, you already have equity in the property.
01/05
CHAPTER 5
A home run for first-time homebuyers
Mountain America's first-time homebuyer (FTHB) program can get you into a new house with a low monthly payment and no private mortgage insurance for as little as $1,000 down.
Up to 100% loan-to-value financing
As little as $1,000 down
One low payment
No income limitations
No private mortgage insurance (PMI)
Loan amounts up to $645,200
Seller can contribute up to 3% toward closing costs
Monthly payments can be deducted from your Mountain America checking or savings
No prepayment penalties
Quick Close℠ electronic closings are available
Various payment options
5/6
Adjustable-rate mortgage with a fixed rate for the first five years, after which the rate can adjust every six months (great for buyers who plan to move within five years)
7/6
Adjustable-rate mortgage with a fixed rate for the first seven years, after which the rate can adjust every six months (great for buyers who plan to move within seven years)
30-year
Fixed-rate mortgage (for buyers who expect to stay in the home longer)
40/15
Balloon mortgage with the option to pay off the full balance or refinance at year 15 (for buyers interested in staying longer and having a lower monthly payment)
