it's easy to feel overwhelmed with home buying, but dont
Make home buying easier with these simple tips
Homeownership encompasses the American dream and many of us are not aware of how the process goes. Before you start your journey of buying a home, it is important to be aware of crucial components before you contact a realtor.
- Be prepared to be open about your finances
There is no secrecy when buying a home. Lenders are looking for 4 things: credit, income, assets and collateral when determining the amount of a loan. They look at your credit to determine if you first qualify, income to see your stability, assets to decide your affordability and collateral to seek if the home is livable and meets loan value. This results in lenders requesting your W2s, two months’ worth of bank statements, taxes and any other financial information that can assist them in determining how much they are willing to loan you.
2. Know the difference between Pre-Qualify vs Pre-Approval
Pre-Qualify is the first step in the home buying process. It doesn’t validate official documents needed to begin the process, whereas the second step, Pre-Approval, does. Pre-qualification is when you supply an overview of your financial history to lender to help estimate loan amount that you can qualify for. It is often self-reported, while Pre-Approval has validated your actual finances such as income and taxes. It is important to have this done before house hunting begin.
3. There is no fixed down payment
How much money you have to put down truly depends on the individual and the state of his/her finances (income and assets). It is best to talk to your lender before relying on what friends and family may so. Nevertheless, it is always great to be prepared and make sure you have money put aside just in case you need a down payment.
4. Know your credit score
Your credit score is a major component when estimating your loan amount. Did you know that there are over 13 different credit scores available to every individual? So, don’t just take what Credit Karma tells you and run with it. Also, be mindful that if you are married or financing with another person, they will take the middle score between both of you. Nevertheless, it is crucial to rely on the professionals when finding out your real credit score.
5. Don’t forget the add-ons that comes with owning a home
Often times we forget to calculate in extra factors that may add to the monthly mortgage payments. For instance, items like Homeowners Association (HOA) fees, insurance, home repairs & up keep, utilities and property taxes. Accounting for these things, gives you a more accurate estimate of the overall cost of owning a home.