If you are a first time home buyer and want to start the process of buying a home there are quite a few things to take into account before applying for a home loan. Below are a few things that you need to know before you start the home buying process.
Clean up your Credit Score
Your credit score will be reviewed by lenders, and it plays an important role in determining the loan amount given by mortgage lenders. If you know you won’t be moving into a new house for at least 6-8 months, there is still plenty of time to clean up your credit. Applicants can order a free credit report from Equifax, TransUnion or Experian. It’s crucial to inspect your credit report and make sure it is free of any mistakes. If you do find an error, contact creditors to make sure everything is up-to-date, and have them send corrections to the credit bureaus as soon as possible.
If you’re buying a home with a spouse or other co-buyer, your mortgage lender will likely consider both applicants credit scores during the application process. It’s important for both applicants credit scores to be as high as possible so you get the most out of your home loan.
Prepare Finances for the Mortgage Process
The last thing you want to do is find your dream home only to discover you’re not financially qualified to buy it or are missing crucial documents needed to obtain a mortgage loan. To guarantee you’re financially ready to buy your first home, you’ll need good credit, cash to close, and a verifiable income. If you are unsure of what documents you need to start the home buying process, contact one of our mortgage lenders at Amerifund Corporation & Realty to help you get started.
Start Saving for a Down Payment
In addition to making sure your credit score is in order, you’ll also want to consider the down payment you’ll need to make buying your first home into an actual reality. Down payments for your home relatively depend on which mortgage loan you are interested in applying for. For instance, if you are looking into FHA loans, as little as 3% down is all you need. If your dream home cost $800,000, that means you only need to put $24,000 as a down-payment on the home and the FHA loan will cover the rest.
Ensure you have all Necessary Paperwork
If you have found your dream home and are getting close to making an offer on a house, start gathering the documents you’ll need to prove your financial situation on the mortgage application: tax returns, W-2 forms, bank statements. If you have freelancing or self-employment income, copies of the last 12 months bank statements are needed to show incoming cash flow.
Did the Home Pass Inspection?
It’s important to make sure the house passes all property inspections before you put in an offer. This process will ensure that you do not face any substantial updates or repairs once you acquire the home.
Even if you want to renovate the house, you’ll need a thorough assessment to ensure there are no hidden issues that you’ll have to deal with later such as the homes foundation, piping issues or roof leaks. You may be able to place a home inspection contingency in your purchase contract, depending on where you’re buying the house. If the house does not meet your expectations or pass inspection, you are able to withdraw your offer from escrow or negotiate repairs charged to the seller.
It’s thrilling to start the home-buying process by going to open houses, but it’s also a good idea to have a preapproval letter from your bank or private lender accessible before you go inside your perfect home. The preapproval letter will inform you how much you can afford and keep you on track to finding your perfect home. When you start engaging with sellers, having that preapproval letter will offer you some negotiation strength as well as speed up the process of submitting an offer. When you have a document showing that you are in a good financial position to purchase the house, you will have a better chance of having your offer approved over other applicants.
Set your own budget parameters
Even if you’ve been preapproved for a specific amount, there’s no regulation that says you can’t create your own budget that’s less than your preapproval amount. This will give you more confidence in your finances and may allow you to save money for other home improvements. Adjust your budget restrictions to meet your needs, whether you want more money to vacation or prefer to live with a greater discretionary income, adjust your budget limits to suit your lifestyle.
If you need additional help getting together the correct documents, or simply have no idea where to start when buying your first home- contact Amerifund Corporation & Realty to get you started. Our knowledgeable and seasoned mortgage lenders have the experience and know-how to get you your dream home in the least-stressful and simplest process possible. Visit our website or give our office a call to get started today.