Before you start shopping for your property, it is a good idea to make some preparations. Starting the process right makes all the difference in the world; otherwise, things can get very complicated. Therefore, it is best to be organized and on the same page with everyone involved. As a realtor and mortgage loan originator, I can attest to this firsthand. First, there is an invisible step, not outlined in the chart above, which may be the most important. “Strategizing” is the most important step for borrowers, especially first time homebuyers. The most important thing to do before shopping for a home is knowing what you’re getting into. This will eliminate tons of stress and costly mistakes. Preparation in regard to; Funds ready for down payment, low credit card utilization, and credit scores are all things to consider. Please click the link below to download the ebook which goes into great detail about the “things to know before you buy a home”.
THINGS TO KNOW BEFORE YOU BUY A HOME
Build Your Green File.
A green file contains all your important financial documents. You will need it to secure financing for your property. The typical green file should contain:
- Financial statements
- DL & SS Cards
- Investment statements
- Recent pay stubs
- W2’s and Tax returns for two years
- 401K statements, life insurance, stocks, bonds, and mutual account information.
Check Your Credit Rating.
Credit – Make sure you are Lender-friendly. Your credit score will have a huge impact on what type of property you can buy, and at what price. It is first recommended to check your credit rating with an experienced lending institution so that we can determine what you can afford. The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian and Trans Union. We will be happy to recommend experienced, knowledgeable lenders in the residential, construction, and commercial and investment real estate fields. The lender’s decision to give you a loan commitment will be determined by your ability to repay. Any good realtor will also ensure that the general criteria to get a loan is met to ensure neither time nor money is wasted. The last thing you want to do is go under contact, offer due diligence money and spend funds on inspecting, only to lose it due to lack of strategy and planning around lending requirements. www.myfico.com is a great resource to find out more about your fico score and the different scoring models.
Be Careful With Your Finances.
Now is not a good time to make sudden career changes or large purchases. You want to approach your property purchase from a position of financial
Find the right lender – When deciding where to start, know there are several banks and mortgage companies out there to choose from, with different loan options and requirements. The easiest thing to do is to start with having a conversation with whomever you bank with and use that history/relationship as leverage. You may already have a car loan or credit card or deposit your income there. That established history can come in handy and make things run a lot smoother. On the other hand, you may want to seek help from a Mortgage professional like myself; someone licensed to originate loans with several lenders and banks, not isolated by one institution.
I strongly recommend getting pre-approved before going to visit homes. This makes the home search a lot easier and eliminates all of the guest work.
Prequalification – Typically, no credit check was done, and the approval was based off stated income. Documentation was not required or verified. Provided by the lender as a ballpark estimate.
Pre-Approval – This borrower submitted an application and was “Approved/Eligible” in a pre-underwriting software. Credit, Income, and Employment were verified. Once this borrower finds a home and is under contract, they can go straight into underwriting.
Feel free to download the free Homebuyer guide for a glimpse of what the process looks like and the perspective I’m able to offer.