Buying your first home
Want to buy your first home and don't know where to start?
Here's some tips to help
Buying a home can be exciting and create a lot of anxiety all at the same time, especially for first-time homebuyers. If you’ve never bought a home, it’s difficult to know what to expect. But with bank rates at an attractive low, it’s worth taking the time to do a little financial homework.
These five steps can make the process go more smoothly.
1. Check your credit
The homebuyer’s credit score is one of the most important factors when it comes to qualifying for a loan. There are lots of different free credit checking websites to use. One of which is CreditKarma.com. Once you have your report, Scour the report for mistakes and collection accounts. Remember you may pay everything on time but that doesn’t mean your credit is stellar. The amount of credit you’re using relative to your available credit limit can tank a credit score. This is considered your credit utilization ratio. The lower the utilization rate, the higher your score will be. Ideally, first-time homebuyers have less than a third of their credit used.
Repairing damaged credit takes time. If you think your credit may need work, you want to begin the repair process at least six months before shopping for a home.
2. Evaluate assets and liabilities
Next you want to evaluate how you spend your money and whether you have piles of money left over every month, or are you on a shoestring budget?
A first-time homebuyer needs to have a good idea what they owe and how much money is coming in.
It’s a good idea to track your spending for a couple of months to see where the money is going.
Likewise, buyers need to become familiar with the basics of mortgage lending and how lenders will view their income. For instance, some professionals, such as those who are self-employed or working on straight commission, may have a more difficult time getting a loan than others. For these homebuyers most lenders will require a strong two-year earnings history to show stability and a steady cash flow.
3. Organize documents
Homebuyers need to document income and taxes. Mortgage lenders will typically ask for two recent pay stubs, the previous two years’ W-2s, tax returns and the past two months of bank statements — every page.
4. Qualify yourself
Homebuyers should know how much of a home they can afford and how much money they can spend each month on a mortgage payment even before the mortgage lender tells them. There are several online mortgage calculators available to help. By calculating debt-to-income ratio and factoring in a down payment, you’ll be able to figure out what you can afford.
5. Figure out your down payment
Coming with a down payment isn’t easy and while there are loans available that can assist buyers that qualify based on income and specific situations many of loan programs do require a down payment. In Southern Utah, we have multiple zero money down programs available so don't let not having a downpayment stop you.
Speak with mortgage lenders when you’re first starting the process to see what you may qualify for. Check with friends, co-workers and neighbors to get referrals on lenders they’ve enjoyed working with.
Additionally, ask them questions about the process and what other steps they might recommend you take when buying your first home.
Are you ready to get started? Fill out the simple form below and a highly respected loan officer will contact you to help you with the pre approval process. Also if you have any questions feel free to call me, Sam Dodd at 435-701-0448 as I am always happy to help.