Tuesday, May 27, 2014

What You Need to Know Before Buying Your First Home

What You Need to Know Before Buying Your First Home

Last week, we introduced our two-part series about first-time homebuyers with “Are You Ready to Buy Your First Home?”, a look inside the factors that indicate if hopeful homebuyers are ready to make the plunge. This week, we discuss a few things that you need to know as a first-time homebuyer.
Shaun Graham, Vice President of Southeast Mortgage
Shaun Graham, Vice President of Southeast Mortgage
Do I need to be pre-approved for a loan?
A “mortgage pre-approval” is a written statement from a lender indicating that the borrower will most likely qualify for a loan at a certain rate based on income and credit information. However, the pre-approval doesn’t guarantee the loan or the rate quoted.
Though the loan isn’t guaranteed, there are multiple reasons why you should obtain pre-approval. Sellers and Realtors are more likely to engage with someone that is seen as a credible buyer and stands out in a competitive market. The pre-approval will also offer you an idea of what kind of house you can truly afford given the rate.
If you aren’t able to secure pre-approval the first time around there are things you can do to secure approval in the future, including striving to improve your credit score, decreasing your debt-to-income ratio and working toward a more substantial down payment.

What should I take with me with when applying for a mortgage?
With 2014 being labeled as the “year of documentation” by HSH , consumers will need to be extra-prepared with their paperwork when applying for a mortgage. Even if you’re not a first-time homebuyer, the necessary documentation will be new to you if you haven’t applied for a mortgage in the past five years. To satisfy mortgage lenders you will need:
  • Photo identification
  • Tax returns from the last two years
  • Two recent pay stubs
  • Bank statements from the last two months
  • Proof of homeowner’s insurance
  • Rent or utility checks. First-time homebuyers will need to prove they have a history of making payments on time.
  • Verification of position and salary
  • List of credit card accounts and amount owed on each
  • List of assets such as bonds or stocks
Other forms may be need to be provided on a case-by-case basis such as 1099 forms if you are self-employed, gift letters and a signed sales contract after making an offer on a residence.

 Do I need a Realtor?
Having a Realtor is an invaluable asset when shopping for a home as outlined in our previous column “Why Enlisting a Realtor’s Assistance is Still a Necessity for Buyers.” Contracts, often up to 50-pages long, and negotiations can be extremely tricky whether it’s a buyer’s first home or fifth home. Contrary to popular belief, Realtors are bound by to law to act in the buyer’s best interest, therefore, it is highly recommended to take advantage of a Realtor’s experience and guidance.
Though buying your first home can be overwhelming, a mortgage lender and Realtor can be extremely beneficial to help ease the process. In addition, many Realtors offer first-time homebuyers seminars and workshops, often for free.

No comments: