How to Buy a Home??

How do you Buy a Home

This is a topic many people especially young families are preparing for.
But after speaking to a local loan officer, Many of them are not ready at all.
Some if not post struggle with one or all of these areas

  • Income
  • Credit
  • Down payment
  • Reserves

Many people assume buying a house will be similar to buying a car or getting a personal loan. While the process may be similar the requirements are slightly different and the underwriting process is more detailed.

Income

You must have a verifiable source of income. Fly-by night jobs or getting paid under the table will not cut it. Make sure you have taxable or documented proof that you are making what you say you are making, this may include the following

  • Paystubs
  • W2 Tax documents
  • 1099 Tax documents
  • Personal/Business tax documents
  • Pension Award letter
  • Social Security Award Letter
  • IRA Income Verification
  • Rental Property Income
  • Asset Statements

Credit

Next your Credit  must be good or decent. Typically lenders prefer you to have at least a 680 to qualify with no extensive credit issues like a bankruptcy, foreclosure, repossession, collections etc. If you experience minor late payments , those tend to fall off over time and have less of an impact on how loan officers choose to approve you. So what factors do lenders pay the most attention to?

  • Length of Credit History
  • Payment History
  • Diversification of Credit
  • Inquiries

A good place to check out your credit Status is credit karma

Down Payment

Down payments are essential because it allows you to be competitive in the housing market. When you have money to put down on a home you start your loan with a decent amount of equity. you also have the ability to have lower monthly payments and a better interest rates. Typically anywhere from 3.5%-20% is what you can put down dependent entirely off of the Lender that is willing to work with you.

  • 3.5% would typically qualify you for an FHA loan
  • 20% would secure a loan and would qualify you for a lower interest rate and a conventional loan

Reserves

And Finally having reserves secured in a savings account or somewhere accessible is crucial. Most if not all lenders like to see that you have not given your life saving up on a down payment. They like to know that you have 2-3 months of a mortgage payment and funds to cover maintenance costs on your home. This is not always required but it is a good thing to remember

  • bank Statements
  • Asset statements

 

 

Do keep in mind the Home buying process is not a scary feature but it can be long and drawn out if you are not properly prepared!

Check out Home Buying Prep Page to see how we can help you in the Home Buying Process!

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