Buying a home is just as much mental preparation as it is financial. Once you’ve made up your mind that you are going to buy that home you’ve always dreamed of, you’re going to need to start getting all your financial documents in order, so you don’t begin your home search with misconceptions and early disappointments. Get everything important together with this handy checklist.
Know Your Credit Score
Rule number one with buying a home is to build your credit rating as high as possible before you start your search. A good credit rating will not only open more doors, but it will also relieve some of the early burdens of buying a home, as you will obtain much lower mortgage rates. Most Colorado home loans, for example, come with the best rates at around 730 and higher.
Gather Tax Returns and Paystubs
The minimum amount of tax and income history that is necessary to secure a home is two years. It’s possible that your lender can look up your tax history for you via the IRS database. Pay stub collection should start at two months, but having the last year of employment history is a nice gesture. Along with those past pay stubs, you can show your household’s balance sheet for what a typical month of finances looks like. This is to demonstrate that you will have no unusual burden placed on your financial status after purchasing of the house and that you will not have issue making mortgage payment.
After Closing Reserves
Don’t purchase a home on a whim, with only enough in your bank accounts to cover the down-payments, fees, and taxes. You shouldn’t live recklessly like that, and plus it will actually be difficult convincing a lender that you aren’t going to be negatively affected by leaving yourself with an empty bank account and no savings after purchase. Another option is to explore "no down payment" or "down payment assistance" programs. Such programs vary by state, so check with your local lender to see what is available in you area.
Owning a home is expensive, the real cost of one doesn’t begin to factor in until you’ve moved in, bought all the necessary daily consumables, comfort items, cleaning and repair supplies, and any home services you might need.
Do Your Homework!
If you’re a real go-getter, you will work towards getting preapproved for a home loan. This means that all your documents and financial status passes with flying colors and the lender gives you a stamp of approval, so that you can move up to a priority on seller’s home buyer lists. Some areas of the country are more strict about being prequalified or preapproved depending on market inventory. Less stress waiting on loan approval also makes shopping for a new home a matter of taste and need, rather than what you qualify for.
Opinions expressed here are the sole responsibility of the author, and do not necessarily reflect the view of Fairway Independent Mortgage.
Ruth Vogt, Sales Manager
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