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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

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CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. 10 Things to Do If You Plan to Buy a House in 6 Months

MORTGAGE

10 Things to Do If You Plan to Buy a House in 6 Months

What you'll learn: The steps to buying a home in only six months

EXPECTED READ TIME: 6 MINUTES

Updated January 27, 2023

Buying a home is an exciting venture, whether you're a first-time homebuyer or an experienced property owner. Besides being one of the largest financial transactions you'll make in your lifetime; there are many steps in the process. So, it's a smart idea to do your research and plan. In this article, we'll discuss how to prepare to buy a house. From reviewing and improving your credit to the cost of homeownership and more — we'll help you every step of the way to your new home.

1. Review Your Credit Score

With only six months before purchasing a home, it's essential to be familiar with your credit report. The difference between an excellent low-interest rate and a much higher one often lies in your credit score. By checking all three credit bureaus early, there's time to start making whatever changes are needed. And the good news is that you can get a free credit report each year.

2. Improve Your Credit Score

Let's begin with some basic information about credit scores. They can range from 300 to 850. For most mortgages, you'll need a score of at least 620. And, for some of the better rates, a score of 700 or more. Take a look at this chart and see where your score is currently:

 300-499

 Very Poor

 579-500

 Poor

 580-669

 Fair

 670-739

 Good

 740-799

 Very Good

 800-850

 Excellent

With your credit report in hand, see where your score falls. If it's below 620, you have some work to do. But if it's above 620, consider applying for a mortgage right away. Here's why — when rates are low, it's better to get a loan as soon as possible. Otherwise, you could spend months working on perfecting your credit only to have rates rise.

If you need to increase your score, first make a list of any errors. Next, contact each credit bureau and request they fix the errors. Here are their addresses for easy reference. We've also included a link where you can dispute online.

TransUnion Consumer Solutions
P.O. Box 2000
Chester, PA 19016-2000
Online dispute

Equifax Information Services, LLC
P.O. Box 740256
Atlanta, GA30374-0256
Online dispute

Experian
P.O. Box 4500
Allen, TX 75013
Online dispute

Besides asking the bureaus to fix any errors, there are several significant things you can do:

Credit Do's

  • Pay on time. Your payment history plays a large part in determining your score. Set up automatic payments a week before they’re due to ensure you're always on time.
  • Reduce debts. It's best to use 1/3 or less of your available credit. So, pay anything down that you can.

Credit Don'ts

  • Don't close accounts. Even if you pay your credit cards off, keep them open. Closing accounts can plummet your score.
  • Don't open new accounts. Hold off getting any new credit or financing vehicles. New credit inquiries can drop your score. Plus, more debt means less money for a house payment.
  • Don't finance new vehicles. More loans fall through because the borrower decides to buy a beautiful new truck or car. Now they can't afford a home.

3. Determine Your Housing Needs

Now it's time to dream and make a list of the features you'd love to have. Involve the entire family. Put these needs in order of importance.

  • Bedrooms: How many bedrooms do you need?
  • Bathrooms: How many bathrooms do you need?
  • Floor plan: Are you looking for a specific type of floor plan?

    For example - make a note if you have your heart set on a modern/open plan. Or if you have teenagers - having bedrooms on the opposite ends of the house might be a necessity.
  • Style: List your favorite home designs. Consider Craftsman, Victorian, modern, ranch, and Spanish.
  • Kitchen: Many families consider the kitchen the most important room of the house. So, make sure you think about all your needs. These may include a stand-alone kitchen island, pantry, or granite countertops.
  • Stories: Decide on how many stories you'd like. It will make house hunting easier. For example, if you're hoping to retire soon - a ranch-style may be better than a three-story Victorian.
  • Garage: This is something often overlooked until you move in. If you love older homes, consider the fact that most of them have small garages. That means you will have to park your SUV in the driveway since it won't fit in a single low-ceiling garage. It might not matter to you, but it's good to consider.
  • Driveway: Some parts of the country get lots of snow. If that's the case where you live, you might want to avoid a steep driveway. That's especially true if you have teenage drivers.
  • Location: Consider everything from how close you are to work, schools, and shopping. And don't forget your church, friends, and family. Decide what's essential and what isn't.
  • Neighborhood: The specific area you select will affect your enjoyment of your new home. For example, growing families will want to be around other families with children. Living in a dog-friendly neighborhood is also a big deal for animal lovers.
  • Walkability: Do you want to live in a country with plenty of space? Or do you prefer a more metro area with high walkability, including local dining and shops?
  • Amenities: Is a pool important? Or would you prefer a planned community that's amenity-rich?
  • Yard: A yard may be on the top of your list or the bottom. It's good to consider that if having a yard isn't essential right now - it may be later.

You can also check out our beginner's checklistfor housing needs for an even more expansive list.

4. Research the Different Types of Mortgages

There are three main categories of mortgages: conforming, government-insured, and jumbo. Here are the basics:

conforming loans conform to specific guidelines. These guidelines include:

  • The maximum loan amount for 2023 is $726,200 for a single-unit property and $1,089,300 in high-cost areas.
  • The minimum credit score is 620.
  • The minimum down payment is between 3-5%.
  • You can buy a home, rental, or investment property with a conforming loan.

Government loans include VA loans, FHA loans, and USDA loans. Here are the basics:

  • VA loans offer as little as 0% down, have excellent rates, and — lenders like PenFed —require a minimum credit score of only 620.
  • FHA loans require 3.5% down and borrowers with less than stellar credit have an easier time getting an FHA loan. Keep in mind, not all lenders offer FHA loans.
  • USDA loans are for rural properties. Keep in mind, not all lenders offer USDA loans.

Jumbo loans are for properties that exceed the conforming lending limits of $726,200 for a single-unit property and $1,089,300 in high-cost areas. Here are the basics:

  • There are various requirements for jumbo loans, including a credit score of over 700.

The above loans are available in different terms, including:

  • Fixed-rate loans of 10-, 15-, 20-, and 30-years
  • Adjustable-rate loans where the payment is fixed for a certain number of years and then goes up or down after the initial period

PenFed specializes in conforming, VA, and jumbo loans. Because we focus on these three types of mortgages, our loan process is smoother, and our loan officers are more knowledgeable.

5. Understand the Cost of Homeownership

There are costs to owning a home. And if you are a first-time homebuyer, it's good to know what they are. Some fees cover the purchase, and others are for once you're a proud homeowner.

When you buy your house, you'll have some one-time expenses. These include:

  • Down payment
  • Closing costs
  • Earnest money (small down payment with your offer)
  • Appraisal
  • Inspection fees

It's essential to start saving money right away. Once you have your home, you'll have ongoing costs. These include:

  • Maintenance and repairs (HVAC, roof repair, tree trimming, and pest control)
  • Homeowners insurance
  • Property taxes
  • HOA fees or condo/co-op fees

When you're renting, your landlord pays for the above. As a homeowner, it's good to have some money in savings for those unplanned emergencies.

6. Start Saving Money and Stop Shopping

This may sound obvious but starting to save immediately is some of the best advice you can get. Depending on the loan type, you may consider putting 20% down. Having a 20% down payment means you can avoid private mortgage insurance (PMI).

If you don't have 20% down, there are still mortgages you can get with only 3-5% down.

The other important thing to do is save your money. Don't buy anything before you close on your home. Avoid car shopping and don't apply for any new credit. Don't add to any existing balances leading up to a home purchase. Your goal is to reduce debt and keep your credit report clean.

7. Get Pre-Approved

As soon as you can, get pre-approved. It's helpful for you to know what you might be able to qualify for. Plus, many sellers require preapproval before they accept an offer.

It's important to know that a preapproval is not a guarantee that you will be approved for a mortgage. It is an initial review of your finances that shows what you should be able to afford. Once you find a home and put in an offer, you will receive a more solid approval.

8. Get Your Documents Together

Having all of your documents together and organized will help move your loan along much faster. Here are the main ones you need:

  • Paystubs: Most recent 30 days
  • Bank statements: Most recent 60 days
  • W2: If you're employed, you'll need 1-2 years of your W2s
  • Taxes: If you're self-employed, you'll need 1-2 years of your taxes
  • Profit and loss: Only if you're self-employed
  • ID: Current driver's license and Social Security card
  • Certificate of Eligibility (COE): Only if you're getting a VA loan

As you move further along the mortgage process, you will most likely need to submit additional documents. So, be flexible. Your willingness to provide whatever the lender needs quickly is the best thing you can do.

9. Find a Great Real Estate Agent

Finding an exceptional real estate agent can save you time and money. It's essential to locate a professional who understands the market and the neighborhoods you're interested in. Their experience will save you time during your search. The right agent can likely save you money by steering you to better values.

10. Find Your Home and Make an Offer

Here's where the real estate agent can show more of their value. In addition to helping in your search, the right agent can guide you along. They can tell you how to make an offer, how much to offer, and where there might be negotiation room.

Buying a home is a journey. Whether this is your first purchase or if you've made several, it's always great to understand all of the steps and options to make your journey as smooth as possible. We hope you've found this information about how to prepare to buy a house helpful.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

Creating Your Home Buying Budget

How much should you budget when buying a home? PenFed Credit Union offers a list of all the expenses and costs you may encounter as you complete closing your home.
Couple calculating a budget together

What Are the Different Types of Mortgages?

There are different types of mortgages for all financial situations. PenFed Credit Union provides details on different mortgages and which might be right for you.
couple researching on laptop together

10 Things New Homebuyers Need to Know

There are a lot of things new homebuyers need to know. Here are 10 things you should consider when buying a home.
couple unpacking and looking out window of home

What Are the Steps to Buying a Home? Part 1

If you are a first-time homebuyer, there is a lot to think about. PenFed Credit Union takes you through the steps of what you need to know before buying a home.
man researching homebuying on laptop
image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of September 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


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IMPORTANT NOTICE

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The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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