You’ve committed to buying a home. Now what? How much home can you afford? Where should you live? Will you even qualify for a mortgage? There is a lot involved in the home buying process. Here’s an outline of the process.
- The first thing you should do is check your credit score.
- A free credit report is available at AnnualCreditReport.com. The report is free but the credit score costs a small fee. You may also find that your bank’s website and credit cards offer access to a free credit report and/or score so be sure to check with them. Discover offers a free score here even if you do not have an account with them.
- Check your report for errors, and take these steps from Realtor.com to get them removed from your report. Be sure not to open new accounts or increase percent of credit used which can negatively impact your score.
- Determine what size mortgage you can afford. Generally, lenders look for a total debt load of no more than 43% of your gross monthly income. However, this may be more money than you want to spend on a home. Use this worksheet from Realtor.org to determine what your debt load is and how much you feel comfortable setting aside for a mortgage. Be aware that the other up front costs incurred with a new home run a couple hundred dollars, including; home inspection, title search, property survey, and home insurance.
- Scour your resources and determine how much money you have available for a down payment. If you do not have 20%, do your research on the options.
- If you are a veteran, VA Loans are a great option. They are made through private lenders and are guaranteed by the Department of Veterans Affairs, so they do not require mortgage insurance. There’s no minimum credit score requirement. The VA loan remains one of the few mortgage options for borrowers who don’t have the money for a down payment.
- FHA loans are available with only 3.5% down if your credit score is 580 or above, below 580 requires higher percent down.
- State sponsored home buyer programs are available to view here.
- Set a priority list of wants and needs for your new home. Be specific about what is truly a want versus a need. A large family may need 4 bedrooms but want 5 to have a guest room. You do not want to miss out on a home because your realtor was unclear of your desires. Put this down on paper and spend some time tweaking it with all decision makers for the home. If you are having trouble classifying what is important, visit a detailed home search page like this one and pic out the options that matter to you.
- Start researching neighborhoods. Check online sites such as areavibes to read about the top rated and largest neighborhoods. Use Trulia maps to see overlays of desired area with statistics and locations of crime, schools,commute, amenities, affordability, demographics, hazards and more.
- Collect required bank paperwork. Don’t throw out bank statements! If you receive electronically you should print out the last 3 months prior to mortgage application. Other items needed include:
- W-2 forms from the previous two years, if you collect a paycheck.
- Profit and loss statements or 1099 forms, if you own a business.
- Recent paycheck stubs.
- Most recent federal tax return, and possibly the last two tax returns.
- A complete list of your debts, such as credit cards, student loans, car loans and child support payments, along with minimum monthly payments and balances.
- List of assets, including bank statements, mutual fund statements, real estate and automobile titles, brokerage statements and records of other investments or assets.
- Canceled checks for your rent or mortgage payments.
- Find a Realtor to guide you through the rest of the process including recommendation for a good mortgage company. A Buyer’s Agent is like a big brother or sister who walks you through the home buying steps after they have helped you find the home that best fits your needs and wants.
Now that you know what to do, be sure to keep track of all the information so that you can speak to your realtor about what your situation is. This will save a lot of time in the home search process.
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In Arizona contact Platinum Realty Network @ 480-326-6521 |