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7 Essential Home Financing Tips
Summary
Buying a home is a big financial decision, and a little preparation goes a long way. Before you start shopping, make sure you've saved for both your down payment and closing costs, and keep a close eye on your credit score. Getting pre-approved will give you a clear picture of what you can afford, and working with a realtor means you'll have an expert in your corner throughout the process. Once you find a home, never skip the inspection as it can save you thousands down the road. And no matter how tempting it is to buy at the top of your budget, leave some breathing room so you're not stretched thin after closing.
So, you’re thinking about buying your next home. Whether you’re just getting started or well on your way, these seven home financing tips can help make the process go as smoothly as possible. Even if you're not a first-time home buyer, it’s always a good idea to do your research and be prepared before making any major financial decision. The market is constantly shifting, and a few things may have changed since your last purchase.
1. Down Payment - Start Planning
The down payment on a home is the money a homebuyer pays upfront for their home loan. The down payment is a percentage of the purchase price and can vary from as little 3% to as much as 20% and is determined by multiple factors. If you qualify, there are loans for first-time homebuyers that require a smaller down payment such as FHA and VA loans.
Wondering how much you’ll need for a down payment? Crunch the numbers with our purchase mortgage calculator or call a Onity Mortgage Loan Officer to review your loan options.
Saving for a down payment can require discipline and patience, but with careful planning, you can set yourself up for success. Start by setting a realistic goal and timeline for when you would need the down payment available. Then create a budget that includes your income, expenses, and how much you will dedicate to savings. With dedication and commitment, you can reach your goal.
2. Closing Costs - Don’t Forget to Plan for This Too
In addition to the down payment, you will need to have money set aside for the closing costs. Closing costs are a variety of fees charged by different parties involved in the mortgage transaction, including the lender, the title company, and the government and can range between 2% and 4% of the mortgage amount.
You can expect to pay for the following fees at closing:
Government recording, transfer, and mortgage recording fees: These fees are charged by the government to record the mortgage with the county recorder and to transfer the title to your home.
Title insurance: This is an insurance policy that protects the lender in case there are any problems with the title to your home.
Flood insurance: If your home is in a flood zone, you will be required to purchase flood insurance.
Homeowners insurance: This is an insurance policy that protects your home from damage caused by fire, theft, and other perils.
In addition to these fees, there may be other fees associated with your mortgage refinance, such as a VA funding fee, an FHA upfront mortgage insurance premium, or a USDA guarantee fee.
3. Credit Score - Keep an Eye on It
An important factor that goes into determining your loan eligibility and interest rate is your credit score. However, don’t just look at your score, but understand what goes into calculating it – things like late payments, the length of your credit history and credit inquiries. Where possible, address and correct any issues to help improve your score.
A useful tool is a comparison chart from myFico.com that shows the effect your credit score has on the interest rate you’ll pay on your mortgage. By continuing to pay your bills on time and not opening new lines of credit before applying for a mortgage, can help you secure a lower interest rate.
And remember when you’re in the process of being reviewed for your new home loan, the same logic applies. Don’t make any major purchases, apply for any large lines of credit, or co-sign anything while in review for your home loan approval.
4. Get Pre-Approved
A mortgage Pre-Approval allows you know exactly how much home you can afford, the interest rate you may qualify for, and the estimated closing costs. During the Pre-Approval process, your mortgage lender will pull your credit to verify your income, assets, and debt based on bank statements and pay stubs that you may need to provide.
Once Pre-Approved, your lender will provide a Mortgage Pre-Approval letter detailing the type of home loan and how much home you could afford. The Pre-Approval offer that comes from Onity Mortgage will expire after 90 days.
Important to note: A mortgage Pre-Approval is not full approval from your mortgage lender. Once you find your home, your lender will still need to approve certain property details to guarantee your home loan.
Get Pre-Approved with a Onity Mortgage Loan Officer today.
5. Work with a Realtor
Real estate agents have years of experience and are up to date on the latest market trends. They can help you understand, if you are also selling, what your home is worth and what you can afford to spend. They can help you find homes that are in your price range and that meet your needs.
Real estate agents have access to the Multiple Listing Service (MLS), which is a database of all homes for sale in a particular area. This gives you access to a wider range of homes than you would be able to find on your own.
They are also legally obligated to represent your best interests in the transaction. This means that they will work hard to get you the best possible deal and that they will protect your interests throughout the process.
As skilled negotiators, they can help you get the best possible price on your home. And when the time comes, they can help you negotiate the terms of your financing and closing costs.
6. Never Neglect the Home Inspection
Don’t pass on the home inspection. The money you pay for a home inspection might be the best money spent in the entire home buying process. A thorough home inspection will alert you to the exact condition of the property and will give you an opportunity to identify any significant flaws in the home. You then have your realtor negotiate with the seller to make the repairs before closing.
Having a home inspection could save you from paying thousands of dollars after the closing. Once you close on your home loan, repairs will be solely your responsibility.
7. Stick to Your Budget
It’s common to want to buy at the top of your price range. Maybe the expectation is your financial situation will improve, but that doesn’t always happen and can create a condition known as being house poor. You have your dream home, but there’s not much money left over for anything else. It’s better to buy a house that is not at the top of your price range and leave some wiggle room in your budget.
A Little Prep Goes a Long Way
Considering these home financing tips will assist you when buying a new home and will help ensure that your quality of life is not negatively impacted by the purchase. Do your research and budget mindfully. Have a plan and a buffer for any unexpected costs that may arise.
Learn more about your home loan options by talking with one of our experienced Onity Mortgage loan officers at 1-877-319-0577 or get started online.
This is for informational purposes only. This is not intended as legal or financial advice.
The interest rate given to an applicant will depend on a variety of personal factors including but not limited to, credit history, type of loan and current market rates.
Key Takeaways
- Start saving for your down payment early — depending on your loan type, you may need anywhere from 3% to 20% of the purchase price.
- Don't forget to budget for closing costs, which can add another 2–4% on top of your down payment.
- Check your credit score before applying and avoid opening new lines of credit or making large purchases during the loan review process.
- Get pre-approved so you know exactly what you can afford before you start house hunting — just remember, pre-approval isn't a final guarantee.
- A realtor brings market knowledge, negotiating experience, and legal representation to the table — they work for you.
- Always get a home inspection. It can uncover costly issues before they become your problem.
- Buy within your means, not at the top of your budget. Leaving wiggle room protects your quality of life after closing.
Home Financing FAQs
Pre-qualification is a quick estimate of what you might be able to borrow based on self-reported information. Pre-approval goes a step further, pulling your credit and verifying your income, assets, and debt, giving you a much more accurate picture of what you can afford. A pre-approval letter also carries more weight with sellers when you're ready to make an offer.
