Over the past week or so I have been following a couple of threads on Zillow and Trulia posted by potential home buyers who want to know where to start on the home buying process. The answers from Realtors is almost universally the same .... talk to a lender and get pre qualified for your purchase. I must respectfully disagree! Getting pre qualified is important but it is not he first step.
Making a down payment and qualifying for a mortgage is very different from making sure that you are really financially ready to buy a home. As a buyers agent my over riding premise for my clients is that I want their home ownership experience to be a blessing and not a burden.
So before you even talk to a lender ask yourself these questions. Be honest with yourself, you are the only one will hear the answers :-)
- Do you have money in the bank? In almost all situations you will need a down payment. FHA loans require 3.5%. Beyond the down payment you need to have cash reserves. The lender might only require 1-3 months payment in reserves. My suggestion is that you have at 3 months income in savings. HUD owned homes can be purchase for only $100 down but you still want to be financially prepared for home ownership!
- Do you have steady and verifiable income? That means a regular job with a steady paycheck that you have had for a while. If you have switched jobs it's not too big a deal especially if you are in the same field. The main thing is that you want to be sure that you have good steady income. If you're self employed it is way more difficult. Have your tax returns ready for at least 2 years worth. If you didn't report it, you didn't earn it. So if you make cash or money under the table or have a ton of write offs that all lowers your qualifying income.
- Are you debt free? I will say this very simply. If you are carrying balances on your credit cards you are not ready for home ownership. Dump the debt. My real preference would be that you also have the car and student loans paid off but in some cases that may not be too realistic.
- Have your regular bills been paid on time? You should have good payment history for the last 12-24 months at least. If you have been struggling to pay your bills then wait to take on a mortgage.
So once you are to the point that you have steady income, on time payments, and money in the bank, then talk to a lender. If you have done your part then the loan process will just be a formality.
When you are ready to buy a home in Marietta, Kennesaw, Acworth, Powder Springs, Smyrna, or anywhere in Cobb County or the surrounding area and want an agent that will help make your home a blessing and not a burden give me call!