The Most Essential Advice For A First-Time Homebuyer
September 27, 2018
The idea of buying a home for the first time can seem like a daunting task with the pages of documents that will cross your path. A bit of preparedness can make the process much less scary than it may initially seem, and well worth the labor in the end.
Get Your Financials In Order
The first and most important step toward becoming a homebuyer is to get your financial documents in order. The four main things your lender will want to review are:
1. A good credit score: A mortgage is essentially a huge loan worth hundreds of thousands of dollars. Your credit history will indicate to the lender how well you handle debt and how likely you are to make your payments on time. Mortgage lenders want to be assured that you can consistently afford to make your payments on the loans, credit cards and auto payments you already have before they commit to offering a mortgage.
2. At least two years of employment history: Mortgage companies will call to verify employment, and generally want to see two years of stable employment. When getting approved for a mortgage, your lender will typically ask that you provide two years of W-2s, or tax returns if you are self-employed.
3. Debt-to-income ratio: Mortgage companies will examine how much of your income is spent paying off recurring bills, including credit cards, school loans, auto loans and medical bills, each month. To calculate your own debt-to-income ratio, add up all of your monthly debts and divide the total by your gross income. Ideally, banks want to see that your ratio is 36% or less.
4. A strong savings account: Save as much money as possible when preparing to buy a home. A down payment is typically between 3.5% and 20% of the home’s overall price, and you will also need savings to cover closing costs, which can amount to an additional 1%-2% of the home’s price.
Don’t be discouraged if your finances aren’t in perfect shape just yet. Get on the right track by building a strong employment history (working at the same place for at least two years) and paying down debts like credit card balances.
Be Patient
The house-hunting experience can feel extremely emotional, and having an offer rejected can feel personal and leave you apprehensive to make another offer. Be patient. You will find your home. Go into the search well aware of the realities of rejections, but don’t let that reality cause you anxiety.
It is rare for a buyer to have their first offer accepted, so you will most likely receive at least one offer rejection (or a few) — it’s all part of the process. It’s important to stay positive, and know that you gave it your best shot without feeling heartbroken for the homes you didn’t get.
Stay Diligent And On Track
Having your offer accepted might seem like the end the process and cause for celebration. The truth is quite the contrary. A whole new journey starts as soon as you receive an offer acceptance, and what happens next is just as important as everything leading up to it.
Once in escrow, pay close attention to your closing timeline. The secret to successfully closing a real estate deal comes down to one thing: doing what you say you’re going to do, when you say you’re going to do it.
Your purchase contract essentially functions as one large timeline to adhere to. The purchase contract outlines exactly what needs to happen and the deadlines in order to keep the transaction moving forward. As the buyer, you’ll want to keep a close eye on these deadlines, which can account for things like your inspection deadlines and dates for securing your house financing. If you don’t, you could be found in breach of contract, which, if the deal goes sour, could result in the sellers keeping your hard-earned earnest money deposit. It’s essential to stay on top of emails and requests from your real estate agent, escrow officer and lender in order to have the smoothest possible escrow and close your home purchase on time.
– The Most Essential Advice For A First-Time Homebuyer
