5 Tips For First-Time Home Buyers
Buying your first home can be stressful. Here are 5 tips to help your first home purchase go smoothly!
First-time home buyers can feel overwhelmed: from finding the right home, to qualifying for a home mortgage loan. By following a few simple tips, you can cut out a significant amount of the stress that comes with buying your first house.
1. Track your spending
Before you can figure out how much money you can afford to pay toward monthly home mortgage, you need to know how much money you have each month after other expenses. A good way to learn about your cash flow is to track your income and spending for several months. If you are barely scraping by, you probably can’t afford high monthly payments. Whereas, if you have tons of money leftover each month after bills and expenses, you can consider higher monthly payments.
2. Consider your income
When deciding which loan offers you qualify for, lenders will look at your income as part of the process. If you’re a W-2 employee, you can easily prove your income. However, if you’re a contractor or self-employed, you may need to have 2 years of income history in order to qualify for the loan you want. It’s a good idea to familiarize yourself with mortgage lending basics, so you’re prepared to show the necessary income history when it comes time to get a loan.
3. Check your credit
Loan officers also take into account your credit history. If you have poor credit, you’ll have a tougher time qualifying for a loan, compared to someone with good credit. You’ll want to know where your credit stands before you start looking at homes or try to get a loan. Knowing your credit score will help you avoid predatory lending, and make sure you get the best loan terms possible.
4. Get Organized
To avoid unnecessary stress and save you time, you can go ahead and collect the documents you may need to apply for a mortgage. Some items you will want to have on-hand before going to a lender are:
W-2s for 2 previous years
Last 2 tax returns
Last 2 months of bank statements
A couple recent paystubs
Once you get in touch with a mortgage broker, like The Mortgage Source, they can tell you any other documents needed to start the mortgage loan process.
5. Figure out how much you can afford
You should already have an idea of how much you can afford to get with a home loan, before you ever talk to a lender. This takes a little research, but there are plenty of online calculators to help you figure out what you can afford. Calculators may ask for your annual income, the down payment you will offer, your credit score, how much you can use for monthly payments, the value of the home you’re buying, and the type of loan you want to get.
Once you’ve taken into account how much money you’re able to save up and use for a down payment, and the limit for how much you can spend on monthly payments, you’ll know what to look for in a home mortgage.