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February 28, 2023

Due to weather conditions, NY banking centers in Orange, Rockland, Ulster, and Sullivan county will open at 10am today. Online Banking, Mobile Banking, ATM’s, and the Contact Center remain available.

Buying Your First Home

Homeownership is a milestone to celebrate. Before you can open the door to your new life as a first-time homeowner, you’ll need to prepare for the home-buying process.

Home Affordability

Working the numbers

There are a number of factors and calculations to consider while you are on your home-buying journey.

What you should know

Debt to income ratio Also known as DTI, this is the number that results in comparing your monthly mortgage payments (including insurance and property tax) to your monthly pre-tax income. When applying for mortgages, you generally want your DTI to not exceed 28% (see the 28/36 Rule below) but if your credit score is high enough, you might be able to still qualify with a DTI greater than 28%.

Bills Along with your DTI, you want to have a realistic view of all your other monthly bills. Even if bookkeeping isn’t your strongest suit, you can go online with your bank and review past months’ statements in order to itemize your bills.

Down Payment This is the initial, partial, up-front payment for the purchase of a property. 20% is the sweet spot for most lenders but many can also work with smaller down payments. Your down payment amount is an important factor in your mortgage options.

Credit Score This number represents your risk potential to lenders, based on formulas developed by credit agencies that look at your income vs. all ongoing debt (i.e. your credit history). Your number will place you in a category ranging from “poor” to “excellent.” Credit scores are variable since your income and debt will increase and decrease over time, so it’s to your advantage to periodically check your credit score.

The 28/36 Rule When calculating how much you can afford, look at your gross (pre-tax) monthly income. You want to spend no more than 28% on home-related costs and 36% on ALL of your debts. That includes mortgage, living expenses, loans, insurance and credit cards.

Checklist

What to know before you buy

Before you begin your home-buying journey, it is important to do some prep work so that you are aware of your options and then you can begin to seriously start shopping. Keep these points on the top of your checklist.

How much you can afford. The rule of thumb is three times your annual income. A loan officer can help you narrow it down to a more precise amount and even provide a pre-qualification letter.
Your credit score. The higher your credit score, the better interest rate you may be able to get. Currently free weekly online credit reports are available from Equifax, Experian and TransUnion through annualcreditreport.com, the only source for free credit reports authorized by federal law. (These reports do not include credit scores.) Examine them and follow the directions to correct errors and make modifications.
Total cost of ownership (TCO). In addition to your monthly payments, consider local taxes, insurance, maintenance, utilities, renovations and association fees (if any).
Where you want to live. Look at school systems, neighborhoods, property taxes, commutes, amenities, and resale value.
What type of residence. Condo, single-family, multi-family, or townhouse? Existing home or new construction? Suburb, rural or city?
Shop mortgage lenders, real estate agents and attorneys. There are lots options for exploring including online and social media sites plus asking trusted family and friends for recommendations is always good. Your local Webster Mortgage Banking Officer can also be an invaluable resource.
The difference between pre-qualification, pre-approval and a commitment letter.
- A pre-qualification letter is based on preliminary information you provide your loan officer and is an estimate on what you might be able to borrow – this is not verified nor formally underwritten;
- A pre-approval letter means your financial information has been formally reviewed and verified by your lender and a credit check is done;
- A commitment letter is issued after the pre-approval letter, provided you meet established guidelines. It is also subject to a property inspection.

Insights for first-time homebuyers

Personal BankingArticles

Credit score pointers for home buyers

By Mina Minelli, Senior Vice President & Shoreline/Central Regional Manager, Home Loans, Webster Bank When you’re ready to finance a new home, you may get thrown a curve ball—your credit score. A recent study by the National Foundation for Credit Counseling found that 36% of people think there’s no reason to check their credit score, […]

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Personal BankingArticles

Don’t let these mortgage myths stop you from making your move

“For Sale” signs keep catching your eye and you find yourself daydreaming about your some-day dream home, but something’s holding you back from making your move. If it’s mortgage myths dissuading you from taking that step from renting to owning, don’t let these misconceptions stop you from buying your first home. Myth 1. You need […]

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Get moving with the right home mortgage

Explore your loan options: fixed-rate, adjustable, jumbo, construction, and government-assisted. Unlock the door to possibility and find the mortgage that fits your finances.

Find the right mortgage

Getting closer to closing

You’ve done all the prep work and now you’re ready to make your move.

When you find a property you like.

Make your offer and don’t be surprised if you have to go over the listing price. The housing market is incredibly competitive right now and bidding wars on properties are not unusual. With that said, remember what your budget is and the work you did figuring out your total cost of ownership (TCO) – the last thing you want is to find yourself overextended. Your dream home can quickly become a bad dream if you’re struggling to make payments.

Go through the process.

You’ll make an offer. The seller will accept or counter. There may be some negotiating before you land on a sale price;
Next is a property inspection. It is important to understand the condition of the property you are purchasing. You don’t want any surprises that can add additional costs or prevent you from moving forward with your home purchase. Make sure you review the report, work with your agent or seller if you have any concerns. Update your lender if there are any significant issues;
Your lender will then schedule a property appraisal to determine the market value of your property;
Once the lender has all this information, they can proceed with a firm commitment, let you know if you are clear to close and schedule the closing. Stay in close communication with your attorney throughout this process, making sure they review all paperwork prior to the closing so there are no surprises;
Sign the papers, collect your keys and congratulations!

Mortgage loan insights

Personal BankingArticles

Condo shoppers: Six potential bumps in the road to a mortgage

As millennials shop for first homes and empty nesters consider downsizing, condominiums are increasingly hot properties. Buying a condo can be the perfect sweet spot between buying a house and renting an apartment, Condos typically come with smaller price tags, require less upkeep than a freestanding property, and are an attractive way to enter–or stay […]

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Personal BankingArticles

Know before you owe: mortgage and home equity key drivers

When applying for a mortgage or home equity loan or line, there are some equations that come into play. Here are the most common factors that will be calculated to determine your credit worthiness. Loan to Value Loan to Value (LTV), is a percentage of what you owe compared to the home market value. Typically, […]

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Personal BankingArticles

What you need to know about getting a mortgage

While there is never certainty with regards to when is the best time to enter the housing market, the idea of homeownership continues to resonate with most Americans and the concept of home ownership being central to the American dream remains very much alive. Most of us will need to obtain mortgage financing when purchasing […]

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Disclosures

All of our home loan originators are registered with the Nationwide Mortgage Licensing System and Registry (NMLS System). To obtain the NMLS identification number of a Webster Bank Loan Officer, please call our Client Assistance Center at 800-325-2424. The NMLS identification number can be used to search the NMLS National Database to view their background information.

All loans are subject to credit approval.