Are you a newlywed? Sick of living in your parent’s basement? Ready to make the leap and become a first time home owner? If this applies to you then your head is probably spinning in a million directions and your days are filled with utter confusion.
Stop that worrying once and for all! Spare yourself from early-onset gray hair, because entering the home market has can be simple and easy. See how you can prepare to become a first time home owner in these 7 effortless steps.
1. Make sure you are ready.
Owning a home is an official step when entering “the real world” and adulthood. With that being said, it is vitally important that you are ready to go through the process of obtaining a home. Are you ready for all the responsibilities that come along with this significant decision?
It could mean forgoing the usual outings with friends, and putting the money towards miscellaneous costs that come along with owning a home- leaking roofs, creaky floors, etc. But, it also means having your own back yard BBQs! No more noisy upstairs neighbors!
2. Do your research.
It is no secret that the housing market has been down in the dumps in the past. Although a bleak market is typically seen as a negative, it’s great news for people entering the housing market. Now more than ever, it is essential that you explore the housing market in the areas of your interest and look at the direction of real estate; the good news is, prices in most markets are beginning to rise. Working with a “Buyers Agent” is usually complimentary, and there are many Real Estate Agents who specialize in helping first time home buyers.
3. Make a budget.
I cannot stress this step enough. The last thing you want to do is struggle financially, desperately trying to make house payments when an unexpected expense arrives. There are various financial factors to consider when becoming a first time home owner. The most common of which are:
• Initial one-time down payment money and closing costs
• Monthly housing costs (Although you may be approved for more, its a good idea to cap your monthly mortgage payment at 30% of your income to avoid financial strain)
• Property taxes
• Home owners insurance
4. Be prepared.
You know what they say, you can never be over-prepared, and the same holds true as a first time home owner. It is crucial that you demonstrate your willingness and ability to repay loans so make sure you have documentation for the following:
• Bank account statements (keep 60 days’ worth on file)
• Federal tax documentation
• Pay stubs (keep 30 days’ worth on file)
• Names of residencies and landlords of previous living arrangements for the last two years
In addition, lenders will typically look at:
• Credit scores
• Credit history (displays your ability to repay obligations)
• Proof of income vs. debts and loans
• Reserves (liquid capital or money that you could use if something were to go awry)
5. Evaluate your credit.
Mortgage credit scores are different. A credit score obtained by a mortgage company will be a little different than scores pulled from a credit report service or from some other type of business. This is an important factor to consider, since your score determines the interest rate and the approval.
Absolute Mortgage invites you to speak with mortgage advisor who will review your current financial situation and provide you with a complimentary customized home loan credit score analysis. This evaluation will reveal your credit score, and also expose any errors on your credit report. Errors should be flushed out and disputed in advance of a mortgage pre-approval to ensure a smooth home loan approval at an optimum rate.
6. Shop around.
As the consumer you have the most power in this circumstance of buying your home. Shop around–compare loans from lenders and brokers. Shopping takes time and energy, but not shopping around can cost you thousands of dollars. You can get a mortgage loan from mortgage lenders or mortgage brokers. Brokers arrange mortgage loans with a lender rather than lend money directly; and sometimes have the ability to place your ‘file’ with the lender most likely to approve you.
Neither lenders nor brokers can find the right loan for you–to find the right loan, you have to do the shopping. *Warning, use extreme caution when having your credit pulled. Once the first lender pulls your credit and you know your ‘mortgage score’ you do not need other lenders to pull it again, simply tell the lender you are comparing with your score.
7. Don’t stress!
The last thing you want to do is stress during the process of buying your first home. This is a monumental step in your life and it should be an easy and enjoyable experience. Most lenders consider an assortment of your information so do not fret or get discouraged if your credit score is in the tank or your reserves aren’t up to par.
The point of working with a mortgage advisor is to be advised on how to get a home loan. A great mortgage advisor, if they can’t approve you right away, will put together a plan to get you approval. So with that, make sure you ask a ton of questions during the process, and take a deep breath because if you follow these 7 easy steps then you will soon be lounging on the couch of your new home.
Happy house hunting!
P.S. want to learn more about “mortgage credit scores?”