Sean Monaghan of WaFd Bank in Vancouver offers tips for those who are getting ready to purchase a home

Sean Monaghan
for Clark County Today

With last week’s news that the Federal Reserve could be cutting rates sooner than later, there is no better time for consumers to start getting ready to purchase a home.

Buying a home is a daunting task, but there are tools at your fingertips that can ease the process such as utilizing your local bank loan officer. They can be your trusted advisor, helping you navigate the market and explore options that fit your budget. Think of them as a free homebuyer tutor, helping prepare you so you are ready to buy when the time is right. 

The four main areas of homework to focus on are budgeting, preparing for additional costs, getting your credit score up, and learning about programs designed to help you. 

Budgeting 

Typically, you’ll need at least three percent to five percent of the cost of the home for a down payment, so once you find the price range of the house you want, you can set up your budget to save enough for a down payment over time. Buying a home is probably the most expensive thing you’re going to buy and there are a lot of costs that can add to the final price. By sticking to a budget you can set a solid foundation so you’re ready to strike when interest rates drop and your dream home comes on the market.  

Additional expenses 

• Inspection and appraisal fees.
• Property taxes.
• Homeowners Association Fees: You will pay these if your new home has an HOA. 
• Maintenance costs.
• Insurance: Almost all lenders require borrowers to have insurance on their home. If you put less than a 20 percent down payment there is also Private Mortgage Insurance (PMI) which many lenders require to be paid on the loan, depending on the amount of your home loan compared to its value, also known as loan-to-value. The PMI you pay every month does not apply to the principle on the loan (the original amount you borrowed). If you want to avoid paying for PMI, ask your lender if they have exclusive or portfolio programs that do not charge PMI. 

Get your credit score up 

To qualify for a loan and get the best rates, you need a solid credit score. The higher your score, the better your loan rate. Raising your credit score takes time, which is why it is a great idea to start working on it well ahead of when you plan to buy a home. To help increase your credit score, consider the following steps. 

• Review your credit report: Ask your loan officer about ordering a free credit report from www.annualcreditreport.com. Review your outstanding credit accounts with an experienced loan officer to help improve your overall credit. 
• Pay your bills on time. 
• Don’t use too much credit: One third of your credit score is based on credit utilization, which is how much credit you have available compared to how much you use. So, if you have a $10,000 credit limit on your credit card and have $2,000 in charges, your credit utilization is 20%. You want to keep this percentage as low as possible.  
• Make sure you have a credit card: Using a credit card responsibly can improve your credit score and helps to build a good payment history.  
• Limit the number of credit inquiries.  

Learn about programs designed to help  

An affordable home is the gateway to long-term and short-term financial success. Long-term, you’ll build equity you can use in the future. In the short-term, you’ll be able to enjoy potential tax deductions (consult your tax advisor) and pay yourself instead of paying rent. Homeownership can seem more challenging for low to moderate income families. However, there are many programs designed to help make home ownership a reality. One program WaFd Bank offers is the Smart Start and Smart Start Boost Home Loan Program. 

• If you qualify for the Smart Start Boost, your down payment could lower than 5 percent.
• No private mortgage insurance (PMI) required. 
• Gift funds, seller contributions and down payment assistance program funds are allowed 

No matter which program you choose to use, they are all beneficial and can help get you into your new forever home.

Sean Monaghan is a WaFd Bank vice president and the branch manager at the Washington Street location in Vancouver.