How to Get Ready for the Mortgage Process as a First-Time Home Buyer
There’s nothing like finally finding your dream home and discovering that you’re not financially prepared for it. Keep this scenario at bay by maintaining good credit and having sufficient cash to close, on top of a verifiable income.
Keeping Your Credit in Check
This shouldn’t be news, but qualifying for a mortgage requires a good credit score. It’s time to review your credit reports, check for errors and get them corrected ASAP, and possibly work with a daily credit score monitoring service for a few months.
You can start improving your credit score by paying off your credit card balances and not using them for about two months ahead of your mortgage application. It’s also smart not to get any new credit until you’ve closed on the property you’re buying. And take note that if you’re purchasing the property with a spouse or a co-buyer, the lender will check both your credit scores when looking at your application. That means all parties involved must work to improve their own credit scores. Note that it will take at least six months to see an appreciable improvement in your credit score, so begin as early as you can.
Saving Money for a Down Payment and Other Expenses
Aside from improving your credit score, you also want to make sure you’ll have enough money to fund your purchase. First, you need to save enough to make a down payment, which is around 3.5% to 20% of the home’s purchase price. As you work on this, steer away from the volatile stock market. You need liquidity, which simply means you have to be able to use your money anytime. As well, while saving up, don’t make the mistake of underestimating the amount you’ll need to close.
Getting Your Documents Straight
Lastly, if you’re about to make an offer on a house, get your papers in order – pay stubs, bank statements, and so on.
Home-buying for the first time is almost always an exciting experience. But apparently, it’s not all that easy. You need to make concrete preparations, especially when it comes to your finances. You should also remember that this preparation does not happen overnight, so this purchase will have to be carefully planned out instead of being done in haste. Luckily, you can use several tools today – for example, mortgage calculators – to make the process more efficient. Definitely, a trusted real estate agent’s guidance will be a huge help.