Tips for Buying a Home for the First Time
Purchasing a home can be delightful and demanding at the same time, especially for a first-time buyer. It’s hard to know just what to expect.
The learning curve may be steep, but nearly all of the concerns can be solved by doing a little financial preparation at the start.
Consider these 5 steps that help make the process easier:
1. Go through your credit.
The buyer’s credit score is among the most important basic when you talk about qualifying for a loan today. To be aware of where your credit stands, look into your current credit report and score and scan it for errors, outstanding or collection accounts. Just because you pay punctually each month doesn’t mean your credit is perfect. Correcting damaged credit takes time – as well as money – if you owe more than lending firms would prefer to see when it comes to your income. Start off the process some 6 months before looking for a home.
2. Review assets and liabilities.
A first-time home buyer has to have a concrete idea of what is owed and what is gained. You have to know a little on monthly cash flow. Moreover, buyers should know how lenders will appraise their income, and that means familiarity with the key concepts of mortgage lending is important. Some professionals, such as the self-employed or straight-commission salesperson, for example, might have a harder time being approved for a loan than others. The self-employed or independent contractor needs to have a whole two-year earning background to prove.
3. Prepare documents.
Applying for mortgages, a home buyer has to keep records of income and taxes. Usually, mortgage lenders will look for two recent pay stubs, the last two years’ W-2s, tax returns and bank statements for the last two months – all pages, including the blank ones. Why all pages have to be included is unknown, but that is what they need. They may be trying to spot inadequate funds or weird money in or out. Investing in a home can take quite a while, but awareness of what you need and where to find it can save you time.
4. Define your capacity.
Calculating debt-to-income ratio and taking into account a down payment, you can have a decent idea of what is affordable to you. The old standard says that less than 28 percent of your gross monthly income should go to housing costs. Determine what you can afford, then return to everything else. You know the cash you can put down and the monthly payment and you can calculate the third variable, or the price of the property.
5. Know how to make your down payment.
It takes work to find the money for the down payment. There are programs that can provide assistance to buyers who are qualified. Assistance loans can range from $10,000 to $40,000, and are interest and payment-free, forgivable following a five-year period. Lastly, talk to mortgage lenders when you intend to begin the process. Ask friends and colleagues to have more knowledge about the first-time home-buying process.
More ideas: read this article