An aspect of the American dream is owning real estate. Buying a home can be combined with many emotions (happiness, excitement, worry, etc.)These emotions can come all at once during the buying process. The best way to handle anything in life is to prepare correctly. As an Honest Mortgage lender, we believe in guiding our clients with honesty and integrity when purchasing a home.
Below are five recommended steps to take before purchasing a home:
1) Credit Score
-My credit score does not qualify or is too Low: First, avoid the common myths about how to improve your credit score. Rumors are called rumors for a reason. Closing your credit accounts could actually cause your credit to be lowered, not using your credit accounts doesn’t help, and the list goes on and on. One of the key actions we take here at Fellowship home loans, especially if a client cannot qualify for a mortgage, is layout a credit action plan to ensure the client will eventually become qualified. In comparison, some lenders may just plainly deny an application because of credit score, we take an approach to help our clients through being an honest lender with the steps they can do to qualify within the near or long term future.
I have great credit- That’s great news! The main goal in this scenario will be to maintain your score. Don’t lose the good credit score you’ve worked for. There are some mistakes that can actually lower your credit, such as, maxing out credit cards, making late payments, applying for tons of credit, and not monitoring the credit. During the loan process, you can consult with your Fellowship Home Loans loan officer prior to taking on any new debt or inquiring about new credit.
2) Figure out What You Can Afford and What You Feel Comfortable Paying
Some home buyers may qualify for a $4,000 monthly housing payment…. But do they feel comfortable with that fixed monthly expense? Did you ever go to the mall to shop with a price in mind and spend much more than expected? It may be okay when you decide to buy the $50 pair of shoes compared to the $30 pair you previously had in mind.. That transaction will only last one day. Most first time home buyers take on a 30 year mortgage note with a fixed payment (escrow subject to change). This is not a payment where clients can decide one day they cannot afford the payment. As a Reliable Mortgage company, we take the extra care and time while analyzing a client’s ability to pay, and will make sure the home buyers know what product they are getting into. The main goal of a home purchase is to provide security not instability. One indicator of seeing what you know you can pay is your current rent.
Down payment and closing costs: In order to fit in the right program for home loan, you will need to be prepared for the out-of-pocket expenses associated with a home purchase. Again, there are different ways of tackling the right program according to your goals. Our approach with my clients is to listen to their goals and then lay out different scenarios to compliment those goals to ensure they shop with confidence and security prior to purchasing.
3) Build a Healthy Savings Account
A healthy savings account creates a more qualified candidate for a mortgage. Usually, you want to aim for at least 3-6 months’ worth of mortgage payments of liquid assets (assets that can readily turn into cash) in a worst case scenario that will be there after closing. Also, savings can cover the upkeep of a home, repairs, and maintenance.
4) Get Pre-approved for a Home Loan before you Step in your First House
The pre-approval process is much more complex than it was a few years ago. After the bubble burst, compliance and underwriting guidelines became stricter to ensure a buyer has the ability to repay a mortgage. The pre-approval means your credit has been ran and documentation was processed to make certain the purchase price you can qualify for. Also, it allows you to shop with confidence and informs sellers you are serious about buying a home. If you are not pre-approved meaning credit has not been ran and documentation has not been verified, you could be wasting your own and other peoples’ time by not knowing the amount of financing you can secure.
5) Buy a House You Like
Weigh your options and buy a house that will make you happy for a few years. If you predict a short stay, renting is still for you unless it can potentially be a profitable investment property.
Looking for mortgage financing options? We can help you find the one that is right for you. Whether you’re looking to purchase a new home or refinance an existing home, we can suggest several products to suit your needs. Just call 1-800-804-SAVE (7283) or visit us at www.fellowshiphomeloans.com
By: Bryan Duarte – Senior Loan Officer at Fellowship Home Loans