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This is one of the most common questions we are asked and we recommend you consider this before finding the home of your dreams. There are three primary factors for you to consider:
Your Income: Generally, the cost of your housing should not exceed 28% of your gross income. That percentage includes the total amount of your mortgage payment, which consists of principal and interest, as well as the cost of property taxes and homeowner’s insurance. This is only a guideline, however, and 28% of your gross income may be more than you are comfortable spending.
Your Debt: Any outstanding debt that you might have (including student loans, credit cards, vehicle loans, interest only financing, mortgage and home equity loans, etc.) is considered. The total amount of your monthly payments (including the cost of your new home) is compared to your gross monthly income to calculate a total debt to income percentage.
Your Down Payment: First National Bank of Hutchinson offers a variety of loan options with down payments ranging from 5 to 20% of the cost of the home.
There are online calculators available that can give you a general guideline of how much you can afford. Although these can be used for general guidelines, we recommend you contact us so that we may help you get prequalified (see further information on prequalification in the next question).
We recommend you contact us to obtain a prequalification letter prior to starting your home search. With this letter you will know how much you can afford and can make an offer on a home with confidence. Some realtors may even require that you have a prequalification letter prior to making an offer. Prequalification letters are not loan guarantees, but they do provide a certain level of approval, based on the information provided (see below). Complete underwriting, documentation, and verification are still required for all loans, even with a prequalification letter.
Home & Loan: Consider the type of home for which you are searching and identify your family’s needs, including: home size, number of bedrooms and bathrooms, storage needs, location, school districts, etc. All of these factors will influence the cost of the home. We will help you identify the type of loan (see an overview of our loan types here) that best fits your family’s circumstances. Consider your plans for the home and how long you plan to live there. This will help us guide you on the type of loan that best fits your needs.
Income: As part of the prequalification, we will review your current income. Be prepared to provide us specifics on how much you (and all borrowers on the loan) earn. The easiest verification is to have either your prior year W-2s or current paystubs for our review.
Credit: We recommend you be aware of your credit and credit score. Information is power. Most loan programs have certain credit score requirements.
Debt: Be prepared to discuss debt obligations in detail.
The First has different options for down payment requirements. The loan programs, with the best rates and terms generally require a 20% (of the cost of the home) down payment. Programs are available, however for down payments as low as 5% (of the cost of the home). Each loan program has different credit score and debt to income requirements. We will discuss the options available for you based on your unique and individual circumstances and on the property type you are considering.