Preparing for your first
There are some basic financial things you can do to get prepared for buying your first home. This will make it easier for you and your mortgage broker.
Start to collect and organize documentation:
- You should start to save and organize your pay stubs. You will often need the past 30 days worth of stubs.
- Go through your old tax returns and sort out your W-2s or 1099 forms. You will need the past two years W-2s/1099 and may need the past years complete returns
- Organize and gather your old bank statements. You may need these to show money to cover down payment and closing costs (last 2 months). These may also be used in lieu of other income documentation (12 months)
- If you have other assets, 401(k), Mutual Funds, Stocks, Life Insurance, etc. you may also need the past 2 months statements from those accounts.
- Check your credit. If you haven’t checked it yet, now is a good time. You can get one for free once a year. If you are working with a mortgage broker they may be able to sit down with you and go over your credit report. Start to clean it up if you can. If you have charge offs, or collections that you can pay off, or have already paid off, make sure they are accurately reporting.
- Save or get copies of your canceled rent checks. Most banks have an online check viewer. Print out or get copies from your bank of your rent checks for the past 12 months.
- If you have any student loans that are still in deferment, contact them and get a letter of deferment.
If you have experienced a major legal event that affects your finances such as a divorce or bankruptcy - keep all documents in a orderly and safe manner. There is a very good chance that some or all of the documentation from these proceedings will be needed in order to get you approved for the best possible mortgage loan. Borrowers with incomplete or missing documentation often get less favorable terms on their mortgage than ones who have such documents.
Congratulations! We would be happy to assist you on your pursuit of the American Dream.
Start saving. Having savings can help with approval in many ways. Additional funds strengthen your ability to be approved. It helps to show that you have reserves. The savings can also be used for a down payment and closing costs. There are also several out of pocket expenses you should expect to have such as the Earnest Money and Appraisal and/or Inspections.
Ways to start saving:
- Pay your self first: This is a common savings technique. Pay your self first means the first thing you do on payday is put some money aside for your savings. This is a fine line you need to walk, don’t jeopardize your credit by missing payments.
- Direct Deposit: if your employer allows you to have multiple direct deposit accounts set one up for your savings account. You will miss the money less if you never see it to begin with in your checking account.
- Clip Coupons: If you don’t now, start. Every little bit of savings can help.
- Cut back on non-essential activities: Home cooking is always cheaper than going out, rent a movie rather than go to the theater, the rental is cheaper and so it the popcorn if you microwave it your self.
- Bring a bag lunch to work. If you go out to lunch or to a cafeteria every day that money can add up quickly.
- Quit or cut back on your vices. Quit smoking, besides being a healthy decision it is a smart financial decision. Do you like playing the power ball or those little scratch off tickets, put that little enjoyment aside until after you have the home.
- Cut back on your current bills. Can you do with out the full cable package for a couple months until you are in the new home? Can you do something to lower your other utility bills, lower the heat or air conditioning, or cut back on electricity and water use?
Pack a first night survival kit. Use one of your moving boxes and pack if full of things you may need your first night. Set this box aside or better yet put it in your car before you even go to closing.
Your Survival Kit:
- Tools: Philips and flat head screw driver, flashlight, pliers or wrench, utility scissors, straight edge razors (simple small tool kits can be bought for cheap at dollar stores, Ikea, and other general home stores)
- Home Essentials: Paper Towels, paper plates, plastic cups, plastic utensils, napkins, toilet paper, light bulb(s)
- Linens: towel(s), sheets, pillows, washcloths.
- Toiletries: soap, shampoo, toothbrush, hairbrush, toothpaste
- Misc: favorite board game, inflatable bed (or pool raft), reading material, deck or cards, not pad, pen, pencil, all purpose cleaner and sponge.
- Complete change of clothes or at least a change of underwear (remember what your mother always told you)
When buying your first home, or any home, please keep in mind that you will not always get the keys to your new house until the mortgage has been recorded with the county and the funding of all money has taken place. Read your purchase agreements carefully because sometimes there may be a specific date or time given that you will receive the keys after the closing (example: the buyer will receive the keys to the property 3 days after closing).
It's possible you might not need all of the information above because some programs call for different documentation. Your Mortgage Broker's task of find a mortgage for you will be much easier with this documentation close at hand and could mean the difference of closing on time or not closing on time. The more efficient you are the faster your loan process will be.
Determine how much mortgage you can afford. Start by analyzing you monthly spending. You should collect your current monthly spending data to see what portion of your income goes to necessary living expenses and what you can cut down on. Stop taking on new debt and trim your non-essential spending. Buying a big-ticket item or a new car can only hamper your dream of homeownership.
Determine how much of your income can be allocated towards housing expenses, then consult a mortgage professional or use the mortgage calculators on this or other websites to determine how much mortgage can you afford. Be realistic, when estimating housing expenses, in addition to monthly mortgage payments, do not neglect other inevitable expenses such as property tax, homeowner insurance, maintenance and the occasional home improvement costs.
It is generally in your best interest to use the services of a real estate agent. Be sure that your agent is acting as a buyer's agent and representing your best interests.
Using a real estate agent costs you nothing when you are buying a home!
Contact me to get the name of a qualified agent.
If you have any questions regarding our products, you can contact us by calling or e-mailing us and we'll get back to you as soon as possible. Thanks!
Information listed above is to be used for educational purposes only and is not guaranteed