5 ESSENTIAL MONEY MOVES FOR FIRST-TIME HOMEBUYERS
Take these five steps to make your homebuying experience go smoothly.
Buying a house can be thrilling — and nervewracking — for a first-time buyer. The learning curve is steep, but doing a little financial homework will help you navigate the process.
CHECK YOUR CREDIT The homebuyer’s credit score is one of the most important factors in qualifying for a loan. You’ve decided to go for it while mortgage rates are still at attractive lows.Buying a house can be thrilling — and nerve-wracking — for a first-time buyer. The learning curve is steep, but doing a little financial homework will help you navigate the process.Take these five steps to make your homebuying experience go smoothly.The homebuyer’s credit score is one of the most important factors in qualifying for a loan.“In addition, the standards are higher in terms of what score you need and how it affects the cost of the loan,” says Mike Winesburg, a former mortgage planner and wealth adviser in Wheeling, West Virginia.Scrutinize your credit report for mistakes, unpaid accounts or collection accounts. Get your credit report and credit score for free today at myBankrate.Just because you pay your bills on time every month doesn’t mean you have excellent credit. The amount of credit you’re using compared with your available credit limit, known as your credit utilization ratio, can hurt or help your overall credit score.The lower the utilization rate, the higher your score. Ideally, first-time homebuyers should have a lot of credit available, with less than a third of it used.But if you owe more compared with your income than lenders like to see, your credit may need work. Start tidying up your credit at least six months
2. EVALUATE ASSETS AND LIABILITIES
4. QUALIFY YOURSELF As a first-time homebuyer, you should know already how much you can afford to spend before the mortgage lender tells you how much you qualify for. Bankrate’s “How much house can I afford?” calculator will help.
So you don’t owe too much money and your payments are up to date. But how do you spend your money? Do you have a lot left over every month, or are you on a shoestring budget?A firsttime homebuyer should have a solid idea of what is owed and what is coming in.
By calculating debt-to-income ratio and factoring in a down payment, you will have a good idea of what you can afford, both upfront and monthly.
3. ORGANIZE DOCUMENTS When applying for a mortgage, homebuyers must have proof of income and taxes.Mortgage lenders typically request two recent pay stubs, W-2s from the previous two years, tax returns and bank statements from the past two months. They want every page of the statements, even the blank ones.
5. FIGURE OUT YOUR DOWN PAYMENT It takes effort to scrape together the down payment. There are programs that can offer financial assistance to help buyers qualify. Finally, talk to mortgage lenders when you’re starting the process. Check with friends, coworkers and neighbors to find out which lenders they enjoyed working with and ask them questions about the process and what other steps first-time homebuyers should take.
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