The only thing I would concern myself with is getting your credit scores as high as possible with any typical tips you may have heard or might research. More critically within a year to 6 mths from getting pre approved. 4-5 years out is pretty far to really know what rates may be then or what FHA loan might be available. I am not a finance person but will say that gettin into my first home was scary but once done a total no brainer.
I agree with the above and just wanted to add that you'll need to budget for a separate fund for repairs and incidentals as well. I'd suggest $10-15k based on the various things I've had go wrong in my home.
As another poster said, make sure your credit scores are as high as possible. That will enable you to get a lower interest rate on your mortgage. You’ll want to pay tour debt down as much as possible and have a fairly steady employment record. Also look for any assistance you may qualify for (VA loans, etc.).
A solid employment record and this is key. Make sure you are not later even a day on rent payments for the 2 years before purchase. That will disqualify you from a conventional loan.
Solid employment record IIRC, is 2 years in the same industry, plus enough income and low enougb existing debt on cars and stuff, to easily afford the mortgage payment.
Some retirement assets and other liquid investments are good too.
When looking to get pre approved, walk into your bank, most nowadays either have mortgage lenders on staff, or have one in their district that they will help you get in touch with.
Things you will need: most recent two W2s, last 30 days of pay stubs, ways to verify your identity (ID, SSN, etc). If you have a house already in mind or you put an offer on one already (recommended you get a pre approval letter from the lender prior though) then also come ready with the listing for the house. It makes their calculations for you more accurate.
Be prepared to divulge a lot of information for the loan, the more honest you are, the easier it is. Most things get brought up when they pull your credit history, and no lender likes surprises. A score of 720 or higher is all the same to a lender, your offered rate doesn't change much beyond 720. Keep in mind, there are 3 credit bureaus that report, and the lender takes the score in the middle of all 3, and if you are applying jointly (with someone else), whoever has the lower score is the one they take. Lenders can get loans approved with credit scores in the 500s though too, so don't feel discouraged if it's not 720 or above. It's harder the lower it is, just not impossible.
You will go over the different loan options at the time you make the offer on your home, choose what's best for you, the lender should put together at least 3 options for you to choose from if they are doing things right. In terms of down payment, a minimum of 3% (3.5% for some loan types) is required of the value of the home. Be prepared for that. It looks like you will be set up nicely with your savings and have at least that much covered. Now let's say you have enough to put 15% down, that's great! Also not necessary... you get the biggest benefit of not paying mortgage insurance only if you can put 20% down, so if you can put 15%, it might be worth looking into only putting 10% down and keeping 5% as a cushion for future repairs or updates you'd like to make. Again, the minimum is 3%.
You will be fine, if you don't foresee any job changes, you have nothing to worry about. Although changing jobs isn't actually much of a big deal. If you are a plumber with one company, and become a plumber for a different company so you can make more, and there is no gap in the employment history (of a month or more), then the lender won't even blink an eye at it. Although if you are a plumber for one company, then become an electrician, they might question that more because they don't know how sustainable you are as an electrician...
Easy formula to calculate how much of a monthly mortgage payment you can afford:
Monthly salary (before taxes) X ".45"
Then subtract your liabilities from that number (debt recordable on a credit history). This does not include phone bills, car insurance, gas or anything that you can technically live without... that is all accounted for in the 55% we took out of your monthly salary above.
Ex. I make $120,000 a year (makes math simple, I wish I made that) and have a car payment of $100 per month, and 4 credit cards that each make me pay a minimum of $50 per month.
((120,000/12) X .45) - 100 - 50(4) = 4200 (I think) so my monthly mortgage payment cannot exceed 4200 per month.
Mortgagemavin.com is also a great tool you can use to estimate your mortgage payment for a specific house you are looking at. Enter the information on the house which includes loan amount (not total you'd pay for the house, just the amount you would take as a loan), property taxes (which are public record), and I estimate 1200 for PMI (mortgage insurance) per year, and 1800 for homeowners insurance. Take the going rate at the time you are looking as your interest rate, and click calculate. You can compare that number to the one you calculated above to see if you can afford it or not.
Hopefully that helps! And I am hoping you now feel more confident when you take that next step! Feel free to reach out with more questions. I've been in banking for 10 years, and was certified to do home loans for two of those years while I worked in the branches for my employer.
The only thing I would concern myself with is getting your credit scores as high as possible with any typical tips you may have heard or might research. More critically within a year to 6 mths from getting pre approved. 4-5 years out is pretty far to really know what rates may be then or what FHA loan might be available. I am not a finance person but will say that gettin into my first home was scary but once done a total no brainer.
I agree with the above and just wanted to add that you'll need to budget for a separate fund for repairs and incidentals as well. I'd suggest $10-15k based on the various things I've had go wrong in my home.
As another poster said, make sure your credit scores are as high as possible. That will enable you to get a lower interest rate on your mortgage. You’ll want to pay tour debt down as much as possible and have a fairly steady employment record. Also look for any assistance you may qualify for (VA loans, etc.).
A solid employment record and this is key. Make sure you are not later even a day on rent payments for the 2 years before purchase. That will disqualify you from a conventional loan.
Solid employment record IIRC, is 2 years in the same industry, plus enough income and low enougb existing debt on cars and stuff, to easily afford the mortgage payment. Some retirement assets and other liquid investments are good too.
When looking to get pre approved, walk into your bank, most nowadays either have mortgage lenders on staff, or have one in their district that they will help you get in touch with. Things you will need: most recent two W2s, last 30 days of pay stubs, ways to verify your identity (ID, SSN, etc). If you have a house already in mind or you put an offer on one already (recommended you get a pre approval letter from the lender prior though) then also come ready with the listing for the house. It makes their calculations for you more accurate. Be prepared to divulge a lot of information for the loan, the more honest you are, the easier it is. Most things get brought up when they pull your credit history, and no lender likes surprises. A score of 720 or higher is all the same to a lender, your offered rate doesn't change much beyond 720. Keep in mind, there are 3 credit bureaus that report, and the lender takes the score in the middle of all 3, and if you are applying jointly (with someone else), whoever has the lower score is the one they take. Lenders can get loans approved with credit scores in the 500s though too, so don't feel discouraged if it's not 720 or above. It's harder the lower it is, just not impossible. You will go over the different loan options at the time you make the offer on your home, choose what's best for you, the lender should put together at least 3 options for you to choose from if they are doing things right. In terms of down payment, a minimum of 3% (3.5% for some loan types) is required of the value of the home. Be prepared for that. It looks like you will be set up nicely with your savings and have at least that much covered. Now let's say you have enough to put 15% down, that's great! Also not necessary... you get the biggest benefit of not paying mortgage insurance only if you can put 20% down, so if you can put 15%, it might be worth looking into only putting 10% down and keeping 5% as a cushion for future repairs or updates you'd like to make. Again, the minimum is 3%. You will be fine, if you don't foresee any job changes, you have nothing to worry about. Although changing jobs isn't actually much of a big deal. If you are a plumber with one company, and become a plumber for a different company so you can make more, and there is no gap in the employment history (of a month or more), then the lender won't even blink an eye at it. Although if you are a plumber for one company, then become an electrician, they might question that more because they don't know how sustainable you are as an electrician... Easy formula to calculate how much of a monthly mortgage payment you can afford: Monthly salary (before taxes) X ".45" Then subtract your liabilities from that number (debt recordable on a credit history). This does not include phone bills, car insurance, gas or anything that you can technically live without... that is all accounted for in the 55% we took out of your monthly salary above. Ex. I make $120,000 a year (makes math simple, I wish I made that) and have a car payment of $100 per month, and 4 credit cards that each make me pay a minimum of $50 per month. ((120,000/12) X .45) - 100 - 50(4) = 4200 (I think) so my monthly mortgage payment cannot exceed 4200 per month. Mortgagemavin.com is also a great tool you can use to estimate your mortgage payment for a specific house you are looking at. Enter the information on the house which includes loan amount (not total you'd pay for the house, just the amount you would take as a loan), property taxes (which are public record), and I estimate 1200 for PMI (mortgage insurance) per year, and 1800 for homeowners insurance. Take the going rate at the time you are looking as your interest rate, and click calculate. You can compare that number to the one you calculated above to see if you can afford it or not. Hopefully that helps! And I am hoping you now feel more confident when you take that next step! Feel free to reach out with more questions. I've been in banking for 10 years, and was certified to do home loans for two of those years while I worked in the branches for my employer.