5 Tips For First-time Homebuyers
Five Valuable Tips for First-time Homebuyers To Implement
1. Check your credit
The homebuyer's credit score is among the most important factors when it comes to qualifying for a loan these days.
In addition, the standards are higher in terms of what score you need and how it affects the cost of the loan.
2. Evaluate assets and liabilities.
So you don't owe too much money and your payments are up to date. But how do you spend your money? Do you have piles of money left over every month, or are you on a shoestring budget?A first-time homebuyer should have a good idea of what is owed and what is coming in.
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We've actually refinanced our home a few times over the past 30 years, and working with Shaun was the best experience. He was very thorough and organized in his communications and follow up. We were doing a VA refinance, which seemed to require a number of additional processes and procedures, but it all came together and I always felt like I knew exactly where we were in the process and what was coming next. I appreciated working with someone who was very knowledgeable, friendly and accessible.
3. Organize documents
When applying for mortgages, homebuyers must document income and taxes.Typically, mortgage lenders will request 2 recent pay stubs, the previous 2 years' W-2s, tax returns and the past 2 months of bank statements -- every page, even the blank ones.Why it has to be every single last page, I don't know. But that is what they want to see. I think they look for nonsufficient funds or odd money in or out.Buying a home can take a long time, but knowing what you need and where to find it can save time when you're ready.
4. Get Pre-Approved (NOT Pre-Qualified)
Ideally, as a first-time homebuyer, you already know how much you can afford to spend before the mortgage lender tells you how much you qualify for. How much house can I afford? By calculating debt-to-income ratio and factoring in a down payment, you will have a good idea of what you can afford, both upfront and monthly.
Though there's not a fixed debt-to-income ratio that lenders require, the old standard dictates that no more than 28% of your gross monthly income be devoted to housing costs. This percentage is called the front-end ratio.
The back-end ratio shows what portion of income covers all monthly debt obligations. Lenders prefer the back-end ratio to be 36% or less, but some borrowers get approved with back-end ratios of 45% or higher.
Find out what you can afford and then you can back into everything else. We know the money you have available to put down, we know the monthly payment and we can solve (the equation) for the third variable -- and that is the home price.
5. Figure out your down payment
It takes an effort to scrape together the down payment.
There are programs that can assist buyers with qualifying incomes and situations.
Finally, speak with mortgage lenders when you're starting the process. Ask them questions about the process and what other steps first-time homebuyers should take.