Key Tips for Navigating the Home Buying Process
Between a fluctuating housing market and sky-high mortgage rates, today’s homebuyers face a tricky landscape. KeyBank’s 2024 Financial Mobility Survey highlights three main concerns for recent and prospective homebuyers: inflation (40%), market competition (36%), and interest rates/mortgage rates (34%). Surprisingly, only 37% of respondents are proactively creating a budget and financial plan for their home purchase.
Despite current economic conditions, the dream of homeownership remains attainable. Here are several steps and resources to help you achieve this goal.
Tip 1: Create a Dedicated Savings Account for Your Down Payment
Setting aside money in a dedicated savings account is a crucial first step and is the most common savings strategy (43%) among those in the market for a home, according to KeyBank’s survey. These funds can be used for a down payment, typically 5% to 20% of the total loan amount. However, saving beyond your goal amount can help ensure you have emergency funds for unexpected expenses.
The survey found that half of new homeowners (51%) plan to use more of their savings next year compared to those currently in the market for a home (45%) or who don’t own a house (35%). Having extra money set aside can help you be prepared for any unforeseen costs.
Tip 2: Check Your Credit Score
Your credit score significantly influences mortgage approval and interest rates. One-third (34%) of those who completed the KeyBank survey and are in the market for a home or have purchased one in the last 12 months cited interest and mortgage rates as a top factor in their purchasing decision.
During your homebuying journey, avoid closing any active credit cards or opening new lines of credit, as this can negatively affect your score. Building your credit a few years before shopping for a home is wise. You can do this by opening and maintaining a credit card, such as the Key Secured Credit Card, paying your bills on time, and keeping credit card balances low.
Ensure you dispute any errors on your credit report before applying for a mortgage.
Tip 3: Establish a Relationship with a Mortgage Loan Officer
Meeting with a mortgage loan officer can provide a personalized approach to finding the right mortgage and assessing your overall finances. According to the KeyBank survey, only 12% of respondents who are in the market for a home or who have purchased one in the last 12 months did not or will not work with a mortgage loan officer.
Mortgage loan officers can help you plan for additional costs, such as moving and renovation expenses, homeowner’s insurance, interest, and taxes. If you’re not ready to meet with a mortgage loan officer, online tools like mortgage calculators can help you understand what is needed to purchase your home.
Tip 4: Identify Ways to Reduce Out-of-Pocket Costs
Many states and financial institutions offer assistance programs for first-time homebuyers and other borrowers. Depending on your income and location, you may be eligible for special purpose credit programs, including grants, additional loans, interest rate discounts, and other monetary assistance for closing costs and fees associated with financing a new home.
For example, KeyBank offers three Special Purpose Credit Programs to help borrowers with qualifying properties in eligible communities. These include the Neighbors First Credit, which provides up to $5,000 toward closing and other costs, and the Key Opportunities Home Equity Loan to assist with home-improvement costs after your purchase.
You can find more information about programs like these online or contact your bank to access these resources.
Sustainable homeownership is a powerful wealth-building tool that can help families and neighborhoods thrive. While the homebuying process can be challenging, the right steps and resources can make it achievable. By creating a dedicated savings account, checking your credit score, establishing a relationship with a mortgage loan officer, and identifying ways to reduce out-of-pocket costs, you can make buying the home of your dreams easier.
