Are you wondering what you can do to secure that first home? Here are four tips designed to make the mortgage process go easier.
If you're a first time home buyer, you may really need some good tips on how to proceed. Perhaps you're worried that you may not qualify for a home loan. By following the tips below, you won't have to worry. You will have all your i's dotted and t's crossed to begin the application process.
If you think you are ready, be sure to get a loan that works well with first time home buyers.
These tips can be followed to kind of clear your mind of a lot of the noise and garbage that a lot of people have likely thrown in. This probably started the first moment everyone heard that you're going to see about buying your first house.
Lenders will offer you "teaser" rates on the radio and in the newspaper, then sucker you in to a much higher rate. Your friends and family will put on display their dense economic and financial ignorance as they tell you to look into balloon loans or wait, wait for housing prices to fall just a LITTLE BIT more.
Don't let all this noise frustrate you. But there are some things you need to have ready before you even begin your search for that dream home.
Below are a few tips that can alleviate frustration and put you in line for success.
First and foremost don't start looking for a home until you know how much you can borrow. Why do I suggest this? I've seen many buyers get depressed when they found the home they wanted and then found out they couldn't afford it.
But I've also seen buyers get depressed when they discovered what they could actually afford. The price could be so low that the homes that fit that criteria was in areas they didn't want to live.
Getting pre-qualified shouldn't cost you anything, but may help you decide to go forward or to wait for now. Even though you may choose to wait, go ahead and find out how much you can borrow.
Let me give you an example, one client I had was qualified for $50,000 and she was very excited. Now she started looking and discovered all the homes that would fit her price range were in bad neighborhoods. She then decided she needed to pull back and improve her credit. She did that by paying off some bills which changed her debt to income ratio drastically.
Long story made short, she did get the home of her dreams. So knowing what you qualify for and why only that figure can help you in the decision process.
Now follow the first time home buyers tips below to make the application process go easier.
Here are some things you need to have gathered to start the application process. You will need a very recent copy of your credit report, documented proof of income (if you are self-employed this can be hard for you to provide and you may have to get a special loan), tax returns for the last two years, and copies of recurring monthly payment statements like electricity, propane, car loans, etc. You will also need to know your credit scores.
If you rent right now, you should have rent payment receipts, too. It's best if you have two years' worth of these, but as long as you show sustained payments over time that should be good.
By having all your documents ready, the application process should happen in a timely fashion. What delays or frustrates many with this process is the calls for more information. Then you have to buy out time to get it to them. Or you play telephone tag to ask questions. By having the above listed documents ready, you avoid a lot of this frustration.
Also, don't try to hold back a document, you'll only show down the process. And don't try to hide anything, they'll find out. To prepare yourself mentally that you'll have to expose everything I use an illustration: get ready to expose your underwear drawer! They will want to see everything!
You can also use my mortgage calculators on this website, if you want to estimate what you can afford for yourself. You just have to do input all the figures.
Keep in mind though, it doesn't cost anything to get pre-qualified and they'll do all the work for you.
Note: Don't go with anyone who wants you to pay a fee to get pre-qualified. They may not be interested in you, just in the fee!
So first time home buyers tips #2 is to get all your documents ready. I suggest to make copies and have several copies of each document. That way if you apply with a different lender you are ready. Only give them copies, not the originals!
If you can't qualify for what you want because of your credit history, you probably should wait and do things in the meantime to raise your credit score. This includes paying down or paying off your credit cards, getting caught up on your delinquent bills, and the like.
Note: Many people don't realize that going into credit management can harm your credit in the eyes of lenders. They don't like to see that because it suggests that you can't manage your finances well. So try to do everything on your own if you can.
Why is this a mortgage tip? Because if you can't qualify for the size of home you want, then you need to take action. Remember to find out what is affecting the amount. Perhaps you don't have enough income and it doesn't have anything to do with your credit. Well then, you may need a co-signer or you may need to wait while you try to get a better job. Perhaps you need a little more time on the current job.
Better to know ahead of time than paying for something you don't want. Although you could look at what you can afford right now differently. You could look at the lesser home as a stepping stone. If the neighborhood is not too bad, you could buy the lesser home and live in it for a few years and build equity. Then sell it and use the equity to buy a nicer home.
I've people gradually work they way up to the home they want this way. If you choose to do this, remember to wait to sell when it is a sellers market so you can get the most out of your home.
Thus first time home buyers tips #3 is to improve your credit history or income standing or buy a lesser home for now, so you can buy a better one later.
Once you have done the first time home buyers tips above, you now need to consider the down payment. If you don't have at least 20% of the purchase price saved for the down payment, you may need to qualify for some low down payment programs, like FHA.
If you already know you don't have enough money saved, then investigate these programs ahead of time. You may even need to look into your state's housing agency to see if they offer any grants for the local area you're looking to buy in. There are federal grants and some states have programs that can help with the down payment.
That is why I have made this first time home buyers tips #4. Get your down payment ready. You can start a savings plan or look into some down payment solutions.
I have some of them listed on this website that you can check out. Go over to the "nav bar" and you will see a list for "down payment options." You will find tons of information to help you.
Just don't wait until you now need the money for closing on the home to investigate. This is something you must do early.
There you have it, four great first time home buyers tips:
Now let me give you one more first time home buyers tips. Find out if you can qualify for an FHA loan. They are more lenient with credit and more flexible with the down payment.
Use these first time home buyers tips to make your experience a positive and prosperous one.
Are you looking for more advice? Have a Question is a cool forum where you can look for answers. If you can't find what you are looking for, then its also awesome for asking questions too. Go ahead...pick my brain!
Like the idea of FHA. My FHA Home Loans page explains the various FHA products so you can make a decision on which of these loan products fits your needs.
Go to House Buyer Solutions Home Page.
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