Wells Fargo Bank

What’s your homebuying goal?

Regardless of your level of homebuying experience, rely on the nation’s leading residential mortgage lender for the information you need to make informed homebuying and financing decisions.

 

It’s your first home but it’s not our first mortgage. Our learning and planning center provides information and tips to help you understand your financing options. 
Our home mortgage consultants are ready to help you through every stage of homeownership – as you plan to buy, when you purchase and even after you own your home. From your mortgage application to your move, Wells Fargo is with you – every step of the way. 

What are the benefits of being a first-time homebuyer?

Buying your first home has many benefits. You’ll become part of a community, experience the security of owning the roof over your head, and have the opportunity to create a home that meets your needs and style.

Your first-time homebuyer benefits also include opportunities to:

Build home equity - Unlike rent, the principal portion of every mortgage payment you make has the potential to grow your asset. Gain potential tax benefits - Your mortgage interest and real estate property taxes are usually tax deductible when you file your income tax returns. (Consult a tax advisor regarding the deductibility of interest.) Build your credit - Making on-time mortgage payments can help you create and keep up a strong credit history. Take control - Rent increases, cancelled leases and other unexpected tenant hassles will be things of the past.

What should I consider before buying a home?

 When buying your first home, you may have questions and concerns. We understand and are here to help.

You may want to think about the following considerations before buying your first home:

Added financial responsibility. You will need to pay for utilities, maintenance and repairs. That’s on top of your mortgage payments, property taxes and homeowners insurance. Potential risk. Real estate often increases in value over time, but not always. Your property value can also go down. Tighter ties. As a renter, you can pick up and move with short notice. When you own a home, selling it before moving on is more complicated.

 

While owning a home has some wonderful advantages, it is one of the largest purchases most people make. Knowing what to expect as a homebuyer can help you make sound financial decisions. 

  

How will you evaluate my mortgage application? 

When your application is complete, we review the following four components:

Income:

• Do you have a reliable, continuing source of income to make monthly payments?
• Income can come from primary, second, and part-time jobs, as well as overtime, bonuses, and commissions.
• You may use other sources of income if you want them considered for payment – including retirement or veteran’s benefits, disability payments, alimony, child support, and rental or investment income – provided they can be verified as stable, reliable, and likely to continue for at least three years.

Current debts and credit history:

• Do you pay your bills, loans, credit cards and other debts on time?
• We examine your payment habits before deciding to loan you money.
• Your credit history and credit score are also examined prior to deciding to loan you money. Wells Fargo also offers a series of online credit education videos.
• It's a good idea to check your credit history and correct any problems before applying.

Assets and available funds:

• Do you have enough funds for a down payment and closing costs?
• You may use funds from a savings account, certificate of deposit (CD), investments, and retirement fund.
• In some cases, you may be able to use a gift from a relative, friend, employer, or not-for profit organization.
• In many cases you will also have to demonstrate that you have additional funds in your accounts to cover several months of mortgage, tax, and insurance payments.

The property:

• What is the market value of the property you want to purchase?
• We will order a property appraisal to make sure your property’s value meets our underwriting requirements.

Responsible lending guidelines

We approve applications where we believe the borrower has the ability to repay the loan or line of credit according to its terms. We use two ratio-based guidelines to evaluate your ability to repay.

Debt-to-income ratio: Your expected monthly mortgage payment (principal, interest, taxes, and insurance) plus your other monthly debt obligations to your gross (pre-tax) monthly income are compared. Mortgage program guidelines vary, but a good rule of thumb is to keep your total debt level at or below 36% of your gross monthly income.

Housing-expense-to-income ratio: We also compare just your expected monthly mortgage payment (including taxes and insurance) to your gross monthly income. Mortgage program guidelines vary, but a good rule of thumb is to keep your housing expense level at or below 28%.

How to calculate your ratios
Even if you fall within the 28%/36% rules of thumb, make certain that you feel comfortable making your monthly mortgage, insurance and tax payments and the payments on all your other monthly obligations. Homes have other costs—such as utilities, maintenance and repairs—that may not exist if you rent.

Understanding the financial considerations that go along with purchasing a home will increase your chances for a successful start. You can also prepare by:

Creating a financial plan

Understand your credit needs and borrowing ability. Know your credit history, assess your ability to make payments, and determine whether you can borrow using collateral such as the equity in your home. Make a plan to get your credit in shape if necessary and establish a budget. Check your credit history. Compare your income and expenses Total the amount of your savings and other down payment sources.

---

Estimating what you can spend

Calculate your monthly payment. Use our payment calculator to estimate payments for various mortgage amounts and interest rates. The total amount you need is the sum of your down payment and your closing costs If you have less than 20%, you will need private mortgage insurance (PMI) which protects the lender if a borrower stops paying the mortgage. Closing costs and prepaid expenses are also a necessary part of getting a mortgage.

---

Setting a time frame

Determine when you’d like to buy your home Take into consideration your credit, cash flow, and savings.

How do I estimate what I might be able to borrow?

We offer different ways to find out how much you may be able to borrow. When you know how much you expect to borrow, you will have a price range before you begin looking for a home.

A free mortgage prequalification lets you know roughly how much you can borrow, based on basic financial data you provide. A preapproval letter tells a REALTOR® and seller that you’ve been preapproved for a specific amount based on a preliminary review of your credit information.

Preapproval is not a commitment to lend. A commitment is contingent on verifying application information, satisfying all underwriting requirements and conditions, and an acceptable property appraisal and title.

Verification of this information, satisfying underwriting conditions, plus a satisfactory title search and appraisal are required for final loan approval.

Remember: Neither a preapproval nor a prequalification obligates you to borrow from Wells Fargo.

How can I benefit from a preapproval?

• You can identify and address possible qualification problems early in the homebuying process.
• Obtaining a PriorityBuyer^® preapproval tells real estate agents and home sellers that you have been preapproved for a specific mortgage amount. Real estate agents and sellers increasingly rely on preapproval to identify serious offers.
• Provides an advantage over buyers who are not preapproved.
• Adds to your negotiating strength when you are ready to make an offer on a home.
• Lets you shop confidently because you know how much you may be able to borrow.
• May allow for a faster closing, since much of the loan work is already completed.

First-time homebuyers can benefit from preapproval in the following ways:

• Without a record of previous mortgage payments, a preapproval can help you feel much more confident pursuing your first home purchase.
• A preapproval shows the seller that a lender has already run the numbers and is willing to proceed with the mortgage.

How does the process work?

• If you’re still in the early stages of house-hunting and want to know roughly about how much home you can buy, request a free mortgage prequalification.
• If you’re ready to move forward, line up your financing ahead of time with a PriorityBuyer^® preapproval, which requires a credit check and a completed mortgage application.²
• Work with us online, over the phone, or in person with a local consultant.

Have questions or need help? Our home mortgage consultants are available to help you throughout the home financing process.   

How can I find a home that meets my needs?

When you are ready to look for your first home, you can receive valuable information and assistance by working with a real estate agent to locate properties for sale that meet your needs. You may want to keep these basic steps in mind:

Preparation

Easily assess what features you want in your home with this homebuying wish list. If you aren’t already working with a real estate agent, your home mortgage consultant can provide you with information to contact real estate agents in your area. Real estate agents make it their business to know about communities and the homes within them.

---

Location

Location is as important as appearance or size. Do you need to be in a particular school district, close to a job, public transportation, or day-care facility? Although no one can predict the rise and fall of property values, talk with your real estate agent about the trends in the area’s purchase prices over the years.

---

Needs and wants

Consider desired features and amenities of your new home. For example: How many bedrooms and baths do you need? Do you need central heating or air conditioning? Separate “wants” from “needs” and prioritize your list. Prioritize each item and look for a home with the most important features.

---

Types of homes

A single-family home is just one of your options. Condominiums, town homes, and co-ops all offer different lifestyle and ownership features. Be sure you budget for monthly fees for garbage and snow removal, landscaping, and similar services charged by these communities.

---

Sometimes finding your ideal home involves compromise. You may want to consider “a diamond in the rough” – a place you can transform with a bit of ingenuity or some renovations. Ask a home mortgage consultant about our Purchase & Renovate^SM Program, which simultaneously funds purchase and repairs.

Your real estate professional and home mortgage consultant will work together to help make buying your first home a rewarding experience.

Benefits of working with a REALTOR^®

Not every real estate agent is a REALTOR^®. What’s the difference?
According to the NATIONAL ASSOCIATION of REALTORS^®, the term REALTOR® identifies a real estate professional who is a member of the association, and who subscribes to its strict Code of Ethics. Some of the benefits of working with a REALTOR^® include:

Professional assistance and representation

Whether you’re buying or selling, a REALTOR® may be able to help you navigate the transaction more smoothly. These trained professionals can make suggestions about what may seem like a complicated process.

---

Marketplace experience

A REALTOR® can assess the market — house-by-house, street-by-street — with access to up-to-date information that you may not have.

---

Buyer’s advantage

A REALTOR® who understands your property and location needs can use his or her network to gather first-hand information on upcoming homes for sale.

---

Seller’s advantage

Selling your home is a huge undertaking, especially when it comes to accurate pricing and bringing in qualified buyers. You may benefit from seeking the assistance of an experienced REALTOR®.

 What can I expect during the rest of the homebuying process?

 Making an offer

Your REALTOR^® can help you determine the appropriate amount for your initial offer based on comparable home sales, market value, condition of the home and your closing date.

When you make the offer, consider these tips:

Put your offer in writing

Negotiations should not be handled verbally; writing ensures understanding between the parties. If you do negotiate verbally, follow up in writing.

---

Have your preapproval for maximum leverage

A preapproval tells real estate agents and home sellers that you have been preapproved for a specific mortgage amount. Real estate agents and sellers increasingly rely on preapproval to identify serious offers.2

---

Submit a deposit

This “good faith” deposit demonstrates commitment to the transaction.

---

Finalize your purchase contract

The contract is a legally binding contract between the buyer and seller describing all the terms of the transaction. Depending on which state you live in, an attorney, real estate agent, or title company may help negotiate and draft the contract. See what purchase contracts typically include.

---

Next steps

Wells Fargo’s Learning & Planning Center can help you understand all the steps of the home financing process.

• Learn about your loan options. We’ll help you find a mortgage that meets your needs from our wide array of mortgage products.
• Start an application. Online, over the phone, or in person, we’ll help you secure your home financing in a way that’s convenient for you.
• After your application is submitted. Learn how you can track your application status online.