Home buying – I’m just getting started

In this section you’ll learn about:

 

  • Questions to ask yourself before starting the home-buying process. Do I know my credit score? Is renting a better option? Should I build? These questions and more can help you kick off the process. 
  • Important mortgage basics, like what a mortgage is, how much you may be able to afford, what a mortgage loan officer is, and how they can help you. 
  • Basic expenses and costs to consider. How much does a home cost anyway? You may already know about the down payment, closing costs and other fees. We’ll help break it down for you. 

Learn more below...

“Buying a home is one of the largest financial decisions you can make. Having resources and an experienced loan officer by your side can make you feel more confident along the way.” 

- Amanda Wilson. - Mortgage Loan Officer [NMLS# 1898362]

Checklist: 8 steps to take before buying a home

Get started on the right foot

Check off these eight steps (and questions to ask) before buying a home.

Confirm your credit score
Credit scores are among the first indicators a mortgage lender will look at. Consider checking out your credit score in preparation.
Start building credit
You'll always thank yourself tomorrow for strengthening your score today. Keep a close eye on your card balances and make payments on time.1
Decide to buy or rent
Homeownership may be the ultimate goal, but in some situations it may make sense to keep renting over the short-term until you can set aside more for a down payment.
Monitor the market
If buying is the right decision, it’s time to identify preferred neighborhoods and research local listings.
Set your ceiling
Determine how much home you can afford by aiming for a total monthly mortgage payment that’s no more than 28% of your gross monthly income, depending on your finances. This is based on your individual circumstances. A mortgage loan officer can help determine an amount that fits within your financial situation. 
Decide to build or buy
Consider the costs of remodeling an existing home to meet your needs against the expenses of crafting a new property to your specifications. The numbers could be closer than you think!
Get pre-approved
Real estate agents recognize mortgage pre-approvals as the sign of a serious buyer. After enlisting a mortgage loan officer to verify your financial profile, you’ll be able to approach agents with confidence.
Start saving
Down payment requirements will vary, but be sure to understand how your initial investment will impact long-term payment obligations.
1 U.S. Bank is not a credit score advisor

Buy, rent or build

Consider your options

 

Should I buy or rent? 
 

Homeownership is a big responsibility. Whether you’re starting your career, settling down with a family or preparing for retirement, it’s important to carefully consider your financial position before deciding to rent or buy. Learn more to determine whether homeownership is right for you.  

 

Should I build?
 

Home building projects require planning and careful cost analysis. Take a look at the expenses involved in the process. 

Home buying basics

How much mortgage can I afford?

A standard rule for lenders is that your monthly housing payment (principal, interest, taxes and insurance) should not take up more than 28% of your gross monthly income, depending on your financial circumstances.


However, home affordability is about more than just how much you can borrow. You’ll also need to consider the following: 

  • Upfront costs such as down payment and application fees
  • Closing costs like attorney fees and escrow deposits
  • Ongoing expenses such as property taxes, insurance and repairs
     
What are my numbers?

 

Calculate your numbers to help determine your unique price range. Use our Home Affordability Calculator to think through your options. 

 

Your debt-to-income, credit history, the size of your down payment, and your employment and residence history are all factors in how much you could borrow. Depending on circumstances, the amount you could borrow may exceed the amount you can comfortably afford — so it pays to borrow cautiously.

Planning and saving tips

Plan and save for your future home

If you’re still saving for your first home, here are some additional tips to help.

 

  • Saving for a higher down payment could mean a lower APR and payments
  • Maintaining a reliable income improves your standing with lenders
  • Adding a co-borrower could be beneficial depending on your situation 
  • Consistently paying your bills on time contributes to a good credit score
  • Limiting your monthly debt also helps improve your credit score
  • Mortgage payments should not exceed more than 28% of your gross income before taxes (a standard rule for lenders)
     

Building sound finances and improving your credit rating before buying a home could help you afford more. Having a down payment plan along with getting prequalified or pre-approved before making an offer on a home could also help you compete within the market (and show sellers you're a serious buyer). Being prepared and examining your finances early on in the journey will be beneficial as you move towards the stages that tend to move a little faster. 

 

Tip: Start saving towards your down payment with these three tips

Homeownership expenses

Other costs to keep in mind

As you plan your home purchase, don’t forget the costs associated with owning and maintaining your home. 

 

  • Mortgage insurance (may be wrapped into the mortgage payment. This is required with some mortgages, depending on what type you choose and how much money you put down.)
  • Homeowners insurance
  • Utilities
  • Repairs
  • Property taxes (can be escrowed and wrapped into your mortgage payment)
     

Make sure you’re taking all these costs into account when asking yourself, “How much home can I afford?” It’s important to be informed on all the costs involved and how much you can afford prior to committing to a home mortgage.

Upfront costs

What will I need to pay up front? 

Some costs associated with buying a home show up before you start making regular mortgage payments. These could include but are not limited to:

Click below to see the breakdown of each cost:

Mortgage application fees include “origination” (or “service”). There are also appraisal, underwriting and credit report fee, which can sometimes be worked into the closing costs.

When purchasing a home, earnest money is an initial deposit paid to the seller if your offer is in consideration. This payment helps put weight behind your intention to buy. If your purchase offer is among multiple bids on a home, the earnest money you put down (also known as a “good faith deposit”) may influence the seller’s decision in your favor.

A down payment is a portion of the cost of a home, paid up front. Because the down payment is effectively your investment in your home, it’s worth putting some thought into how much you can put down. When you put more money down, you’re taking on a portion of risk from the lender, who can reciprocate by giving you potentially lower mortgage interest rates. You can often get the best mortgage rates by paying a higher mortgage down payment, but there are options for those who aren’t able to put a high amount down.

 

Tip: Down payments can range anywhere from 0% to 20% or more of the total cost of the home. Paying mortgage points up front could also help lower your payments and interest.

 

It’s not uncommon to purchase a home with a down payment of 15 percent, 10 percent or even less. Some government-backed loans, like FHA mortgages, VA loans, and USDA loans may be available to qualified home buyers with little or no down payment. However, with some of these loan programs, you may be required to pay for mortgage insurance – an extra monthly expense you’ll need to pay along with your mortgage payment. It’s a good idea to understand the different types of mortgages loans and their requirements. 

 

Tip: The more money you pay up front, the less you’ll owe on your mortgage. Because the amount of your down payment is subtracted from the total cost of the home, your loan amount will be smaller with a larger down payment – and so will your monthly payments. You can use our down payment calculator to estimate your monthly payments based on the amount you borrow.

Closing costs typically range from 2% to 5% of the loan amount. However, they can vary depending on your lender, location and property. Other closing costs can include but are not limited to:

 

  • Mortgage application fees
  • Mortgage points
  • Attorney fees
  • Inspections and surveys
  • Title insurance and title search
  • Escrow deposit
  • Recording feeds (city/county/state) 

 

Tip: Don’t be intimidated by the list of closing costs. They are all estimated early on in the process by the lender so you generally know what to expect. Some costs are paid upfront, others can be combined into the monthly mortgage payment. 

Resources

Planning calculators

Run your numbers and make a plan.

 

Deciding whether or not renting or buying is right for you? Run your numbers through our rent vs. buy calculator. 

Rent vs. buy calculator

 

Interested in checking your numbers to see how much you might be able to afford? Try our affordability calculator. 

Mortgage affordability calculator

 

Calculate a VA or FHA loan, determine a down payment number, see your fixed-rate numbers and more. Find the right calculator for your needs. 

Other mortgage calculators

 

Check these off your list

Put pen to paper and keep track of these key steps when buying a home. Fill these in, print them off and keep them handy during your journey.

 

 

Ready to see if you're pre-approved for a loan? It's a good start to see how much home you may be able to afford. Here's what you'll need to get pre-approved.

Pre-approval checklist

 

This monthly planner will help you analyze your current and future housing-related expenses. 

Monthly budget planner

 

Print and bring this checklist when you visit an open house or tour a listing. It may help you narrow down your options.

Open house checklist

 

Make sure you’re getting the most out of the inspection by asking these questions.

Inspection checklist
Ready for next steps?