Real Estate Agent
Before you begin shopping for that new home there are a few more very important steps to take care of. The next step we’re going to discuss is, many times, the one that buyers are most fearful of – getting a mortgage. It’s a huge commitment, there’s a lot of paperwork and a lot of jargon that can be confusing! But don’t worry-we’ll help guide you step by step so you’re prepared and it doesn’t feel as daunting.
1. Build Your Financial File
The first step is to get all of your financial information together. This will ‘paint the picture’ for a lender as to exactly how much you can afford and what types of loans you can qualify for. Some important items include:
- Financial Statements
- Bank Accounts
- Credit Cards
- Auto Loans
- Investments (property, retirement accounts, etc)
- Recent Pay Stubs
- Tax Returns
- Additional debt and income information
Getting this information together at the beginning of the process will save you lots of time and frustration down the road.
An additional step we recommend is to pull your credit score from all 3 credit bureaus for free. This allows you to make sure there aren’t any false claims or inconsistencies that might affect your financing. You’d be shocked to know how many errors there are on a lot of buyers’ credit reports that they were unaware of. A few minutes of homework can save you thousands down the line.
2. Get Your Finances in Order
Home ownership is a big responsibility and you need to make sure you’re ready to make the plunge. Sit down and be honest with yourself about your monthly income, debts and any other financial responsibilities. As the saying goes – “you don’t want to be house rich and cash poor,” meaning you may not want to sacrifice other aspects of your life so you can buy a more expensive home. We certainly don’t want you eating Ramen for dinner every night, or not being able to go to the movies because your mortgage payment is too high.
The best way to go about this is to figure out how much you want to pay per month and still live the lifestyle that you’re used to. This number can then be used to determine the price point at which you are comfortable purchasing a home.
Sometimes banks are able to lend more than you’re comfortable paying on a monthly basis and that’s all right. It’s much better to know now what you can afford to budget each month for your mortgage rather than finding your dream home and then realizing that buying it would put you in a dangerous or stressful position. Everyone’s situation is different, so take the time now to do your homework. Be honest and figure out exactly where your priorities are.
3. Connect with a Professional Loan Officer
Once you have gathered all of your financial information, and determined the monthly payment you’re comfortable with, it’s time to speak with a lender to see exactly how much you can afford. There are tons of great loan products in the market right now ranging from conventional loans, to low down payment loans and even 100% financing loans. Your mortgage expert can advise you on what your options are and which would work best for your situation and needs.
Even if you feel financing will be easy, we always advise speaking with a professional lender before starting your home search. Loan products and criteria change daily, and rates you see posted online are many times “teasers” with additional costs.
If you don’t already have a trusted lender, please don’t hesitate to contact us and we would be thrilled to recommend one of the highly experienced mortgage professionals that we work with on a daily basis. They can provide you with a free pre-approval that will show exactly how much home you can afford within your budget. Once you have this information you’re one step closer to finding your new home!