You’ve decided to go for it. Buying a home can be thrilling and nerve-wracking at the same time, especially for a first-time homebuyer. It’s difficult to know exactly what to expect. The learning curve can be steep, but most of the issues can be resolved by doing a little financial homework at the outset.
Take these 5 steps to help make the process go more smoothly.
Check your credit
The homebuyer’s credit score is among the most important factors when it comes to qualifying for a loan these days.
The standards are higher in terms of what score you need and how it affects the cost of the loan.
To get a sense of where your credit stands, collect your credit report and score. There are many tools and resources to do this. If you need assistance, the Trout Team can point you in the right direction.
Scour the reports for mistakes, unpaid accounts or collection accounts.
Just because you pay everything on time every month doesn’t mean your credit is stellar, however. The amount of credit you’re using relative to your available credit limit, or your credit utilization ratio, can sink a credit score.
The lower the utilization rate, the higher your score will be. Ideally, first-time homebuyers would have a lot of credit available, with less than a third of it used.
Repairing damaged credit takes time — and money, if you owe more than lenders would prefer to see relative to your income. Begin the process at least 6 months before shopping for a home.
Evaluate assets and liabilities
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 piles of money left over every month, or are you on a shoestring budget?
A first-time homebuyer should have a good idea of what is owed and what is coming in.
When applying for mortgages, homebuyers must document income and taxes.
Typically, mortgage lenders will request 2 recent pay stubs, the previous 2 years’ W-2s, tax returns and the past 2 months of bank statements — every page, even the blank ones.
Buying a home can take a long time, but knowing what you need and where to find it can save time when you’re ready.
Ideally, as a first-time homebuyer, you already know how much you can afford to spend before the mortgage lender tells you how much you qualify for.
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.
Though there’s not a fixed debt-to-income ratio that lenders require, the old standard dictates that no more than 28 percent of your gross monthly income be devoted to housing costs. This percentage is called the front-end ratio.
The back-end ratio shows what portion of income covers all monthly debt obligations. Lenders prefer the back-end ratio to be 36 percent or less, but some borrowers get approved with back-end ratios of 45 percent or higher.
Figure out your down payment
It takes effort to scrape together the down payment.
There are programs that can assist buyers with qualifying incomes and situations.
Finally, speak with mortgage lenders when you’re starting the process. Check with friends, co-workers 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.
Once your finances are in order and you are ready to begin looking for your new home, the help of a knowledgeable realtor can be invaluable.
Rest assured that you can trust the Trout Team for all of your real estate needs.
If you are considering purchasing a home in the area, there are many questions that should be answered before you make your purchase.
If you are buying in The Villages, you need to understand the Villages District Development system.
You need to understand the “bond” associated with each Villages purchase.
You need to know the deed restrictions in the specific area you are considering. What are you allowed to do and not allowed to do with landscaping, decorating, changes to your home and more!
As you consider a purchase in the area, you need a real estate agent who is well versed in the area you are considering to provide the answers you will need to make informed decisions. Without the proper information, the decisions you make can prove costly and can not only waste time, but keep you from making the best decisions.
The members of the Trout Team will listen to your concerns and provide the answers you need. We will assist you in finding the right home in the community or Village that best suits your needs and your lifestyle.
All said, for the best Buyers Agent representation, call Judy Trout today! Help is only a phone call away, 352-208-2629.
www.judytroutrealestate.com | email: email@example.com