Some in the mortgage industry have taken to calling 2015 the year of the first time buyer due to low interest rates, dropping gas prices and the FHA taking the unprecedented step of lowering mortgage insurance premiums.What does this mean to you as a first time buyer? Whether you want to buy this summer or even sometime next year, there are things you need to do now to be ready.
Know what's on your credit report
Your credit history speaks volumes about you and they way you mange your money and your debt. The information collected by the big three collection agencies, Transunion, Equifax and Experian will be used to determine if you qualify for a loan so it's imperative to know what your on report says about you. Everyone is entitled to a free copy of each report each year so make sure you request your free report and check it for any errors. These companies do a good job but sometimes they make mistakes and those mistakes can often take months to straighten out so the sooner you get started the better off you will be.
What is your credit score?
The credit report above is what will be used to determine your credit score. The higher the number, the better chance you have to obtain a mortgage at a more attractive rate. The actual means of calculating credit scores can be really confusing. Who would think that paying off a credit card and closing the account could actually lower your credit score? Or that paying off an old deficiency can lower your score by updating the debt to the current year, making it reportable again. It's admirable to pay off outstanding debt but it could end up hurting you in the long run. It pays to start working with a mortgage professional early in the home buying process because they can advise you on exactly on the best things to do to raise your credit score.
First Time Buyer Programs
Many loan options are available to the first time home buyer and joining forces with a knowledgeable mortgage specialist is the best way to find the right loan for you. Is it better for you to go FHA or conventional? Are you a veteran, can you use your VA benefits? Do you qualify for the Good Neighbor program? A mortgage professional stays on top of all the new programs and can advise you on the right loan to fit your situation. I have built strong partnerships with local mortgage lenders who have proven themselves with their ability to close a transaction and I would be happy to recommend them to you.
Save those Papers
When the time comes to apply for your new home mortgage you will be asked to provide a mountain of paperwork to your mortgage professional. It can seem a bit overwhelming but it really doesn't have to be. Begin early by starting a file with your previous two year's tax returns, pay stubs from the last
30 days and full statements from all of your bank accounts including checking and savings, IRA, 401Ks and brokerage accounts. You will also need a copy of your driver's license or passport and proof of your most recent rental payment to reflect your actual monthly housing payment. If you have been at your place of employment for less than 2 years or if you're self employed you may be asked to provide more information. Once you gather all of these documents and give them to your mortgage professional don't be surprised if they ask for more items. That is common, try not to get frustrated. The sooner you can deliver the requested papers the better, remember that the goal is to get a mortgage and buy a home.
Save, Save, Save
If you haven't started saving for your down payment then now is the perfect time to start. The more money you're able to put down, the less your monthly mortgage payment will be. After your closing you will officially be a homeowner which means there will be repairs and maintenance to take care of the property and having a nest egg will save you a lot of stress down the road. Starting a plan to save early will help it become an ingrained habit. Look at it not as depriving yourself now but more like saving for your future.