Buying a home is a big decision. For most people, a home is the most expensive purchase they’ll ever make. So it’s very normal to be excited but also a little bit nervous about the whole thing.
Whether you’re a first-time homebuyer or a seasoned pro, I want you to know that I’m here to be make sure the transaction goes as smoothly as possible for you. That’s my top priority every single time, and I’ll do whatever it takes to make your experience a pleasant one. Home shopping is supposed to be fun!
I work hard to make sure that you always know what’s going on with your home purchase. You’ll never feel unsure of where your transaction stands or feel confused about what happens next.
I’m here to answer as many questions as you have and to make sure you get into the house of your dreams. Ready to make it happen? Let’s do this!
Check Your Credit
The better your credit score, the better your interest rate will be (check out this cool calculator to see what a difference your credit score can make to your monthly payment).
If you’re not happy with your score, fixing your credit begins with knowing what’s wrong with it in the first place. Go to annualcreditreport.com and get a free credit report from each of the three major credit bureaus—Transunion, Experian, and Equifax.
If you see any mistakes on your report, get them fixed right away. When you fix a problem, the lender must report the correction to all three credit agencies, so you shouldn’t have to fix the same problem three times. Look for:
Payments incorrectly posted as late
Bills marked unpaid that you actually paid
Loans or credit cards you didn’t sign up for
Get Financial Documents Ready
Your lender will need financial documents from you when you apply for a mortgage. Here’s a short list of things you’ll need.
Personal tax returns (2 years)
W-2s or 1099s (2 years)
Bank statements (2 months)
If you own a business, business tax returns (2 years)
Proof of alimony or child support payments
You may need more documents as the loan process continues, but this is a good place to start.
Pay Down Debt
The lender will use a ratio called the debt-to-income ratio (DTI) that compares your monthly debt payments to your monthly income.
Basically, DTI is your monthly debt obligations (car payment, student loans, monthly minimum credit card payments) divided by your monthly gross income.
So if you have $1,500 in monthly debt payments and $5,000 in monthly income, your DTI is 30%.
This number is important because it helps the lender determine how much money to lend you. They don’t want your monthly debt obligations to be too high.
If you have debt that you don’t want to count in your DTI, pay it off right now, before you apply for a loan.
Stop Other Borrowing
If you’re applying for a mortgage soon, it’s a smart move to stop other kinds of borrowing. In other words, now is not the time to get your dream car and a house full of furniture. There will be plenty of time for those things after you’ve closed on your new home.
In fact, don’t even apply for any new types of credit during the loan process.
Decide on a Down Payment
You’ll need to put money down to buy a home. You may have heard that you need 20% of the home’s price, but that’s actually not true. You can buy a home with as little as 3% down. Just remember that the more you put down, the lower your monthly payment will be.
Now is a good time to sit down with your finances and decide what you feel comfortable putting down on your new home and how long it might take you to get there. It will be much easier (and quicker!) to get pre-approved for your new home if your finances are straightened out. After that work’s done, it’s time to move on to pre-approval!
Determine How Much You Can Afford
The lender will tell you how much you can afford during pre-approval (more on that in the next section), but this doesn’t necessarily mean you can actually afford a home that costs that much.
Take a hard look at your budget and make sure that you know exactly how much of a monthly payment you can really afford. You may need to look at homes that cost less than the number the bank pre-approves you for.
You’d never go shopping without a wallet, and shopping for a home without getting pre-approved first is about the same. During a pre-approval, the lender will verify your finances, so they can decide how much to lend you.
Pre-Qualification vs. Pre-Approval
You’ve probably heard of both a pre-qualification and a pre-approval, but one is a lot better than the other. If you’re serious about buying a home, skip straight to the pre-approval. It requires a credit check and financial documentation. Because the lender actually verifies your financial information, it’s a lot more robust than a pre-qualification.
Here are some of the advantages of getting a pre-approval before you shop for a home:
When you get a pre-approval, the lender tells you how much money you’re likely to be approved for (keep in mind that a pre-approval is never a commitment to lend). This way, you won’t shop for homes that are over your budget.
Because the lender has already gone through your financial documentation and pulled your credit, a pre-approval makes it more likely that they’ll be able to approve your loan once you do find the home you’re looking for.
A pre-approval shows all parties that you’re not just window shopping. You’re serious about buying a home, and that strengthens your offer.
Now that you’ve been pre-approved, it’s time to start shopping for your dream home.
So, why do you need a hard-working local Realtor®? A Realtor® makes your home search easier. That’s because a Realtor®:
Has expertise about local market conditions
Knows about homes you may not know about
Is a negotiator who wants to get you the best deal
Has many local connections that make everything home-related easier
I’m here to make your entire transaction, whether you’re a first-time buyer or an experienced buyer, go smoothly. I can foresee potential problems and prevent them before they derail the home you’ve worked so hard for.
Plus, you won’t ever pay me a cent. I’ll get paid from the proceeds of the sale of the home. So, there’s no reason not to take advantage of all the ways I can help you!