3 Quick Tips for First Time Home Buyers
Three Tips for First Time Home Buyers
While buying a home is an exciting process, there are things to be aware of before you begin this journey.
Tip #1 – Credit is King
Regardless of how much money you earn, how much you are putting down on the home, or how long you have been at your job, more than anything, lenders want to know how likely you will be to make your mortgage payment each month. There is no better indicator than history.
The two most important things that you need to keep in mind with regard to credit, before you shop for either a mortgage, or a home, are:
1)Recent late payments have a huge impact on your credit score. It is unlikely that any type of lender, is going to be able to extend you credit if you are unable to manage your current debt. Stay current on your bills.
Late payments over time will have less of an impact on your score, but recent 30 day late payments, will send a message loud and clear to your lender that you may have challenges taking on even more debt, specifically theirs.
2)Too many maxed out credit cards have a huge impact on your credit score. Lenders want to see how well you manage your debt day to day. If most of your credit cards are topped off it is likely your personal finances are headed in the wrong direction.
Try to keep credit card balances as low as possible while you’re preparing to buy a home. Maintaining a balance at or below 40% of the available credit limit is a good idea. If you have $5,000 available and you keep your balance below $2,000, you’ll be just fine.
Tip #2 – Go With the Flow
Make no bones about it, the mortgage process has become more involved over the last few years, especially since the mortgage meltdown of 2007 and 2008. Lenders are overly careful to dot every I and cross every T. Your lender may ask you for things that seem farfetched but rest assured there are good reasons most of the time.
Lenders ultimately sell the loans they originate. The prospective buyers of these mortgages will scrutinize them, and if there are questions as to what was documented, and how well, the lender may have to come back in the future and ask for further documentation, nobody wants this.
Your best bet is to respond to whatever request your lender has, as far as letters of explanation or other types of documentation, so that the process may continue to move forward. The more timely you can provide this information, the more expeditiously your file will move through the process.
Spending valuable time arguing with your Loan Officer or Processor about underwriter requests is a futile effort, just know that they do not want to request these documents any more than you want to go digging for them.
Tip #3 – It’s Your Money Make it Count
As a first time home buyer, most everything that you will encounter in the process will be new to you, and at times overwhelming. Make sure that you take your time and choose the right home and the right mortgage product.
No two homes are equal. There are numerous considerations when choosing the one that is right for you. Don’t just consider your circumstances today, be sure to think about the near future and the extended future. The size of the home and the neighborhood will have a lot to do with how happy you are in the future.
It has been said for years that kitchens and bathrooms sell homes, don’t fall in love with the home with the most amazing Jacuzzi tub, even though it is only a 2 bedroom and you really wanted 3.
If you need to see 10 homes before you find the one that is right for you, so be it. Careful consideration and planning will lead to long term happiness and less regret.
Choose the right mortgage product. I’ve seen a lot of people take an Adjustable Rate Mortgage because they assume they will only be in the home for a couple years. Only to wind up finding out that values have dropped dramatically and they can’t sell their home. Now they’re stuck with an uncertain mortgage payment and very little hope of refinancing.
Some programs only require 3.5% down and others require 5%, if your finances are tight, it may make sense to go against your Dad’s advice and put less down. The difference in payment is nominal however, having that extra $3,000 in a savings account for a rainy day can turn out to be a life saver.
Do your homework, manage your finances, work as a team, think about your future, don’t fall for the one amenity you’ve always wanted while sacrificing necessities and your first time home buying experience will be far more rewarding.