Have you started looking for a home but have roadblocks that stood in your way? Have you thought about it but don't know where to even begin? Let's make 2022 YOUR YEAR by following these steps.
Credit and your Score. Your credit history and your score can, unfortunately, make or break your immediate dreams of purchasing a home. To begin your wonderful journey in finding your home, you must start with your credit history and your score. Do you know what your score is? What does your history reflect? Have you had late payments or maybe you don't have any credit established yet. Let's get you started here with this site (and make sure you download the free app on your phone) https://www.creditkarma.com/. Credit Karma is a free site and offers you information on your credit from two of the biggest credit bureaus - Transunion and Equifax and also provides you with a score. Keep in mind that your score changes daily based on your history for a certain period of time.
Have a relationship with a local financial institution (Bank or Credit Union). Do you have questions on your credit report and score? Talk to the financial institution you have a relationship with about helping you go over your report. Unless you are applying for a loan, a FI cannot pull your credit just to review it but you can take your credit report in and ask them to help you. Also ask them if they offer mortgages. If they do, ask them to go over what types and what the requirements are. Unless you are 100% ready, you don't want to begin applying for mortgages just yet. Your FI can help you determine what is best if you have past debts owing or if you have little to no credit.
Determine a comfortable payment for your budget. Even though you haven't officially begun applying for a mortgage yet, begin setting a budget, in your mind, of what you would be comfortable paying for a payment. Taxes, insurance, and PMI will be included in your monthly payment but you are still going to have your regular expenses - groceries, cell phone, internet, car insurance, car payment, utilities, etc. If you have a budget in mind, it will help you when you apply (and are approved) for a mortgage.
Continue to save for a down payment. Conventional mortgages require 10%-20% down. FHA,VA, and other types of mortgages have lower down payment requirements. Based on the conversation you have with your financial institution on what direction you need to go as well as the budget you have in mind, continue to save to meet your down payment requirements for that specific number. While you are budgeting, if you can begin cutting out waste now, it will be easier to set aside your down payment as well as freeing up some income to put in your savings account or to put into your retirement.
Don't change jobs! Taking a promotion within the same company is fine, but don't leave a long term job for a new one! In order to purchase a home, you will need to show 2+ years of consistent employment with the same company.
Make a list of must haves (non-negotiable) and negotiable. Hundreds (or thousands) of homes could be available in your specific area and you don't have the time or the energy to look at every house that is available in your price range. Each house is not going to have every want/need that you are looking for so if you divide them up and tie a weight to them, you will know what direction to go in. If you want a 4 bedroom house, looking at 2 bedroom homes may not be ideal unless you are looking to add on and do a major remodel. Your Realtor® will work with you to choose and show the houses that will most criteria possible.
Don't take on too much new or added debt. As part of your credit check, your DTI (debt to income) will be determined and having to much debt when looking to purchase a home will negatively impact you. Pay off your debt as fast as possible to report positively on your report, to save you money on the amount of interest you will pay, and to keep your DTI as low as possible.
Enjoy the process. Getting the information together to apply for a mortgage is a lot but enjoy the process and keep good notes of everything. Every question, every call, every email, etc. This will make it easier to keep track of what you need and what you have done. Meet the deadlines. Mortgage pre-approvals are only good for a short period of time - so make sure you are putting your soon-to-be mortgage tasks at the top of your priority list.
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