Where to Start When Buying a Home
Whether it’s your first home purchase or your fifth, it will be one of the largest purchases you’ll ever make. The process can be as overwhelming as it is exciting. These tips will help you be proactive and navigate the process.
1. What’s Your Credit Score?
A credit score is calculated with the following personal financial data:
- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% New Financial Credit Activity
- 10% Types of Credit
IMPORTANT: Your credit will be pulled when you start the application process. It will be pulled again just before closing. Any new loans or credit on your report could jeopardize your closing. You don’t want to lower your credit score or affect your debt-to-income ratio. Speak to your lender before making any large purchases during the home buying process.
2. Get Prequalified Before You Start House Hunting
When the market is low on inventory, the bidding competition can be fierce. When homes are getting several offers above asking price it’s important to go into your offer prepared. A prequalification will help you determine the maximum price you can afford. This will help you focus your home search so you don’t fall in love with something you can’t afford. It will also let sellers know you’re a serious buyer and can successfully get a loan. We offer several calculators that can help you get started.
3. Save Up
Having a cushion in your savings account makes it easier to purchase a home. Most lenders require a down payment, and you’ll also have closing costs to pay. You’ll not only want to have that amount in the bank, but enough additional reserves to feel financially comfortable after you purchase your new home.
You may have been paying rent and utilities; however, a home will come with additional costs. As a homeowner, you’ll pay for pay for property taxes, mortgage insurance, homeowners’ insurance, repairs, maintenance, etc.
Set aside additional funds in your budget for repairs and maintenance so you’re prepared when they come up. You will also have some costs to move. This could include furnishings, appliances, updating fixtures, new paint, and hiring movers. A good rule of thumb is to have three to six months of living expenses set aside as an emergency fund.
To help you save up, look at your current expenses. Take the time to tighten up your budget and cut costs. If you only have a checking account, consider setting up a savings account as well and have funds automatically transferred from checking to your savings.
4. Prepare Your Paperwork
You’ll be asked for a lot of documentation when you apply for a mortgage. Some of the items you’ll be asked for include:
- Income Documentation
- 30 days of pay stubs (most recent)
- 2 years W2 statements
- 2 years tax returns
- Asset Documentation
- 2 months banking statements (most recent)
- 2 months investment statements (most recent)
- Most recent retirement statement
- Homeowners Insurance
- Agent name and phone number
The exact forms you need for a home loan will depend on your situation, but this list will give you a head start of what to put together. These documents along with your credit report will help your lender assess your home buying power.
Being prepared is the first step on your path to homeownership. If you need help with your home financing give one of our lenders a call at (920) 788-4141. If you’re ready to get prequalified you can start here.
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