Information for First Time Buyers
The decision to buy a home is an easy one, especially if you are well prepared. Having decided that you want to purchase a home is the first step towards the ultimate goal of owning a home. There is always that thrill that comes with making such a grown-up’s decision. The same decision to own a home makes people very nervous especially so for first time home buyers because they do not know for sure what to expect in the process of acquiring their new home. This post provides you with some of the information you need as a first time home buyer. The learning curve is admittedly steep, but you are more likely to make a better choice when faced with the many options out there. A good place to start learning involves doing your financial home work.
Know Your Credit
Your credit score as a home buyer is of utmost importance because it determines whether or not you qualify for a home loan. The lending/financial institutions nowadays demand higher standards compared to earlier times. These standards interpret to what credit score you need to secure a loan and how your credit score affects the interest rates and repayment installments for your loan (the cost of the loan). You can check your credit score from credit bureaus for free.
It is wise to scrutinize your credit report for errors and mistakes, collection accounts and unpaid accounts. Also important to note, is that if you pay every loan on time that does not mean that your credit score is rock solid. Usage of credit versus your available credit limit usually referred to as credit utilization ratio, also affects your credit score. People who maintain a low usage rate have a higher credit score. More often than not, first-time home buyers have a high credit score due to the low credit utilization factor. However, for a person who has damaged credit, it takes time and money to repair their credit.
About Assets and Liabilities
A first-time home buyer ought to know what is owed and what is flowing in as income. One’s knowledge of his or her monthly cash flows is vital because it gives them a hint of how mortgage lenders will perceive or view their income. Together with this, it is important to have the knowledge of mortgage lending. Some first-time home buyers may have difficulties in securing a mortgage loan due to the nature of their monthly cash flows. For example, a professional with an unpredictable monthly income such as a straight-commission sales person may find difficulty in finding a mortgage loan.
All home buyers must document their income and taxes when applying for a mortgage (s). Mortgage lenders could ask for:-
– recent pay slips
-The Past two months’ bank statements
-Past two years’ W-2s and tax returns.
Home buyers must present all pages of the documents mentioned earlier must to the mortgage lender.
Before mortgage lenders tell them how much they qualify for, first-time home buyers already have a rough idea of how much they are will and can afford to spend on a home buying project. To determine the amount of money they can afford, both upfront and monthly, buyers calculate their dept-to-income ratio and factor in the down payment. A fixed dept-to-income ratio does not exist.