Buying a home is exciting and scary at the same time, especially if you are a first-time buyer. The best way to approach any large decision in life is by doing your homework. Here are four steps to help make the home purchasing process go a bit smoother.
Check your credit
A credit score is often the most important factor that will affect a buyer in the qualification process of purchasing a home. You can check it yourself by visiting AnnualCreditReport.com to get your free report from all three credit bureaus; this is an opportunity to see what lenders see. It is important to review the reports to ensure that there are not any mistakes, unpaid accounts, or collection accounts prior to approaching a mortgage broker. Paying all of your bills on time is great, but there are other factors. For example: the amount of credit you're using relative to your available credit limit, or your credit utilization ratio. If you have less than desirable credit, note that repairing damaged credit takes time, so begin the process at least six months prior to shopping for a home.
Evaluate Assets and Liabilities
If you do not owe too much money to the bank, and all of your payments are current, you are ahead of the game. But ask yourself how you spend your money. Do you have a large amount left over every month or are you on a tight budget? A first-time homebuyer should be aware of what is going out and coming in, or your cash flow. Buyers should become familiar with the basics ofmortgage lending as well. In some cases it is more difficult for a self-employed person, or straight commission sales associate to get a loan. If you fall into either of these categories you will need a solid two years' earnings history to show the lender.
It is wise to begin gathering all the documents required for a mortgage lender beforehand, including the documents typically used to authenticate income and taxes. Usually two recent paystubs, the previous two years' W-2s, tax returns, and the last two months of bank statements are needed. Buying a home is a lengthy process, but knowing what you need and having it available can save you time.
First-time homebuyers should know how much they can afford to spend on a home before the mortgage lender tells them how much they qualify for. Buyers should have a good idea of what they can afford to invest, both upfront and on a monthly basis, by calculating their debt-to-income ratio and factoring in a down payment.
A standard debt-to-income ratio stipulates that no more than 28 percent of gross monthly income be housing costs. This is called the front-end ratio. The back-end ratio is all debts including housing costs, and lenders prefer that to be under 41 percent. Once you know what monthly payment you can afford, and you have the down payment amount, finding the cost of the home for you is simple.
Are you considering a move in the near future? The Nate Robinson Home Selling Team is here to help you before, during, and after the process. Call my office at760-566-7600, visit us at 2383 Camino Vida Roble, Suite J inCarlsbad, or send me an email [email protected]
Author:Nathan Robinson Phone: 631-774-6374 Dated: June 30th 2016 Views: 2,639 About Nathan: An entrepreneur and a relentless innovator of the real estate industry, Nate Robinson is the creator...
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