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Financial Planning & Tips for First-Time Homebuyers in the Pacific Northwest

November 6, 2024

Buying a home for the first time is an exciting milestone, but it can also feel overwhelming, especially when it comes to understanding the financial steps involved. Whether you’ve already found the home of your dreams or are still exploring options, knowing what to expect in the home-buying process is key to a smooth and successful journey. At New Tradition Homes, we understand the challenges first-time buyers face, and we’re here to help guide you through the steps so you feel prepared and confident.

How to Financially Prepare to Buy a Home

The financial side of buying a home can be complex, but with the right information, first-time home buyers can make informed decisions. Here are a few tips for first-time home buyers and essential steps to take when planning to buy a home.

1. Determine Your Budget

Before anything else, make sure your finances are in order. Have a clear understanding of how much home you can afford. Not just the purchase price, but additional costs such as property taxes, homeowner’s insurance, and maintenance. Consider current debts and income or DTI (debt-to-income) ratio as a starting point. Even if you can afford a larger mortgage, experts recommend that monthly housing expenses (mortgage payments, taxes, and insurance) should not exceed 28% of your gross monthly income. Check your credit score, too. A higher credit score is a powerful tool. If your credit score could use some work, it may be better to hold off on homeownership until you build up your score.

2. Save for a Down Payment

When you've determined what you can afford, you can figure out how much you want to save for a down payment. While some loan programs offer low or no down payment options, most home buyers need to save at least 3-20% of the home’s purchase price for a down payment. The amount you put down can affect your monthly mortgage payments and interest rate, so it’s wise to save as much as possible to reduce long-term costs. However, there are programs available to first-time buyers, along with builder incentives to help with monthly payments. Be sure to work with your lender for the best options.

3. Understand Home Closing Costs

In addition to the down payment, buyers must budget for home closing costs, which can range from 2-5% of the loan amount. These costs typically include things like appraisal fees, title insurance, taxes, and attorney fees. Make sure to review the closing cost estimate provided by your lender early in the process to avoid any last-minute surprises.

4. Get Mortgage Preapproval

Mortgage preapproval is a critical step in how to buy a home. Preapproval gives you a clearer idea of your budget and demonstrates that you’re serious about buying. Shop multiple lenders and find out what types of loans and rates they offer. A lender will review your financial information, including your credit score, income, and debt, to determine how much they’re willing to lend you. A preapproval letter shows that you can get financing, which can give you a crucial edge over competing home shoppers.

5. Explore Loan Options

First-time buyers can access various loan programs designed to make homeownership more affordable. For example, FHA loans offer lower down payment requirements and are ideal for buyers with lower credit scores, while VA loans provide competitive terms for veterans. It’s a good idea to work with your lender to determine which loan product best suits your needs.

Here are a few loan types you might consider:

• Conventional - Good with high credit scores and large down payment.
• FHA - Good with lower credit scores and little to no down payment.
• VA - For members of the US military, veterans, and their spouses. No down payment is required.
• Fixed-Rate Mortgage - Charges the same interest rate over the life of the loan.
• Adjustable-Rate Mortgage - Charges an interest rate that can vary over the life of the loan as the market changes.

6. Get a Mortgage

Once you choose a lender, you'll work with a loan officer to complete the actual application. This is a paperwork-heavy process, so be prepared to do a lot of coordinating. Here's what you'll need:

• W-2 forms from the past two years (possibly more, if you've changed employers)
• Pay stubs from the past 30 to 60 days
• Proof of other sources of income, including documentation of any gift money
• Federal income tax returns from the past two years
• Recent bank statements, usually for the past couple of months
• Details on long-term debts like car or student loans
• ID and Social Security number

Once the mortgage application is complete, you'll go into underwriting. Underwriting includes exploring your finances, so you may need to present more documents. During this process, the lender decides whether to give you the loan, making sure there's nothing about the deal that's too risky.

7. Prepare For Closing

On or near closing day, you'll do a final walk-through. Make sure to check that everything’s as agreed upon. Familiarizing yourself with closing documents ahead of time can make the closing process less nerve-wracking. Your lender will provide you with a Closing Disclosure at least three days before closing. Compare it with your Loan Estimate to see whether and how any closing costs have changed. This will let you know how much total cash you’ll need to close. When you attend your closing meeting, bring ID, a copy of your Closing Disclosure, and proof of funds for your closing costs. You’ll sign a settlement statement listing all expenses related to the home sale. This is when you pay your down payment and closing costs. You’ll also sign the mortgage note which states that you promise to repay the loan. Finally, you’ll sign the mortgage or deed of trust to secure the mortgage note. After the closing finishes, you’re officially a homeowner.

8. Don’t Forget About Ongoing Costs

Finally, remember that buying a home isn’t a one-time financial commitment. Ongoing expenses such as utilities, homeowner’s association (HOA) fees, and general maintenance should also be factored into your budget. Planning for these recurring costs will help ensure that your new home remains a source of joy, not stress, over time.

Find the Best Homes for Sale in the Pacific Northwest

As one of the largest home builders in Washington, New Tradition Homes offers a variety of communities with homes available in Vancouver, the Tri-Cities, and Winlock, WA.

In Vancouver, WA, New Tradition Homes offers communities like Amira's Song, Si Ellen Farms, and Northside with beautiful yet attainable homes.

• Amira's Song | Battle Ground, WA | 8 Quick Move-In Homes
• Northside | Washougal, WA | 3 Quick Move-In Homes
• Paradise Pointe | Ridgefield, WA | 4 Quick Move-In Homes
• Pleasant Woods | Vancouver, WA | 2 Quick Move-In Homes
• Si Ellen Farms | Vancouver, WA | 3 Quick Move-In Homes
• Stephens Hillside Farm | La Center, WA | 3 Quick Move-In Homes
• Walker Field | Battle Ground, WA | 3 Quick Move-In Homes

The Tri-Cities area includes Richland and Pasco, with communities like Badger Mountain South, Goose Ridge Estates, and Grandridge Estates featuring beautiful surroundings near the rivers and recreational areas.

• Badger Mountain South - West Village | Richland, WA | 1 Quick Move-In Homes
• Goose Ridge Estates | Richland, WA | 4 Quick Move-In Homes
• Grandridge Estates | Grandview, WA | 4 Quick Move-In Homes
• Spencer Estates | Pasco, WA | 1 Quick Move-In Home
• West Vineyard at Badger Mountain South | Richland, WA | 2 Quick Move-In Homes

New Tradition Homes also serves the Winlock area, offering a variety of floor plans and quick move-in homes.

• Grand Prairie Estates | Winlock, WA | 5 Quick Move-In Homes

New Tradition Homes brings a balance of comfort, energy efficiency, and appealing designs across these Pacific Northwest locales. With a focus on family-oriented communities and a variety of options, New Tradition Homes is a good place to search for homes for sale in the Pacific Northwest.

Contact Us Today!

Ready to take the next step toward homeownership? New Tradition Homes is here to help! Our team is dedicated to guiding first-time home buyers through the entire process, from mortgage preapproval to understanding home closing costs, and more. With the help of trusted lenders, we offer incentives and savings that ensure buying a home is more financially attainable.

If you're looking for new homes in Washington State, New Tradition Homes has a variety of options to fit your needs. Browse our quick move-in Designer Homes and monthly payments here. Or explore our communities and floor plans to find the home that’s right for you. Then, contact us to get started. Let’s make your dream of homeownership a reality!