How to buy your first home without stress is easy if you get your financial situation in order and research local market trends.
Home ownership not only comes with certain tax advantages; it is a great way to start building a foundation of future wealth. If only figuring out how to buy your first home weren’t so daunting! All those steps and paperwork, not to mention decisions about where you want to live and competition with other buyers in low inventory markets.Buying your first home doesn’t need to be anxiety-provoking, though. You can make the process virtually stress free if you follow just a few simple steps to prepare and educate yourself even before you pick the real estate agent who will help you find the perfect home.
What’s the First Thing You Should Do?
At least six months before you go to obtain a preapproval letter — even more if you have filed for bankruptcy or had a significant hit to your credit rating — you should begin to get your financial situation in order. Why? Lenders will carefully scrutinize your records to see if you are a safe risk, and prospective buyers can be denied loans or forced to pay higher interest rates if they don’t have the following:
- Proof of income and employment verification. Lenders require you to have W-2 statements going back two years. You will also need to provide at least two years worth of tax documents. Employees who work for a company will need to provide a letter of employment verification. If, on the other hand, you are self-employed, you should get ready to provide documentation in the form of invoices and tax records. Establishing a regular pattern of income up to two years before applying for preapproval is the best way for an independent contractor to ensure eligibility without significant assets.
- Proof of assets. This may include bank and investment account statements or a letter from someone who is willing to make you a personal loan. Banks want to know that you are able to afford the necessary down payment before they will agree to lend you money.
- Excellent credit. If you want to get the lowest interest rate possible, your credit score must be 740 or above. In order to qualify for the 3.5 percent down payment on a Federal Housing Administration (FHA) loan, you’ll need a minimum score of 580. Ordering your credit report in advance lets you fix any discrepancies before the bank sees the information. If your credit score is low, it may be worthwhile to build good credit before seeking loan approval. A lower interest rate can save you thousands of dollars over the term of the loan.
*courtesy of Movato.com &
Nakia Evans, GRI, REALTOR
Associate Broker
Coldwell Banker Residential Brokerage
22 W. Padonia Avenue, Ste. A-100, Timonium, MD 21093
Office phone: 410.252.2111
Direct phone: 443-864-1358
Email: nakiaevans@cbintouch.com
Coldwell Banker and the Coldwell Banker Logo are registered service marks of Coldwell Banker Real Estate LLC. Coldwell Banker Residential Brokerage is owned by a subsidiary of NRT LLC. If you have a brokerage relationship with another agency, this is not intended as a solicitation.
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