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    The ABC’s of being a First-Time Homebuyer

    Becoming a first-time homebuyer is a big decision, probably one of the biggest you’ll make in your lifetime. There are many advantages to being a homeowner (tax savings, equity in something you own, and stability, to name a few). But before you rush into being a first-time homebuyer, you’ll want to remember your ABC’s.

     

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    The ABC’s (and D’s and E’s) of Being a First-Time Homebuyer

    1. Assess Your Current Situation
      Begin by determining how much money you make each month and how much you spend. Mortgage lenders will be paying close attention to where your money goes each month, so you should too. It’s also important to understand that future first-time homebuyers who are self-employed or work on a straight commission may have a harder time getting a loan without two solid years of earnings documentation.
    2. Be Aware of Your Debt to Income Ratio
      Your debt to income ratio is how much you owe compared to how much you make. This number trips up more homebuyers because most “think” they know how much of a mortgage they can afford, but they are surprised when mortgage lenders tell them otherwise. A quick guide is you want no more than 28 percent of your gross monthly income to be devoted to housing costs and all other monthly debt obligations to be less than 36 percent.
    3. Check Your Credit
      The first-time homebuyer’s credit score is one of the most important factors related to qualifying for a loan. Many new buyers think if they’ve paid all their bills on time, they must have great credit scores. That isn’t always the case. If you aren’t sure of your credit rating, it’s a great idea to consult a credit counselor and get your credit score around 750 before you start looking.
    4. Deliver Your Documents
      You are going to have to organize and deliver a lot of documents to your mortgage lender in order for them to tell you if you are eligible for a loan. These documents include tax statements from the last two years, bank statements for the last two months, your last two pay stubs, retirement income statements, loan statements, and sometimes others. Be prepared for this. It is often one of the most frustrating parts of the first-time homebuyer’s process.
    5. Expect to Save
      Before you begin the home buying process, you need to save for your downpayment. There are lots of options for first-time homebuyers when it comes to the percentage of downpayment expected, so do your homework.

     

    We recommend the folks over at Fairway Mortgage for all our first-time homebuyers. Andrea Kindley and her team do such a great job walking you through the entire lending process. And when you are ready to buy that first home, we’d love to help you find the home of your dreams.

    Keeping it real,

    The Cloninger Properties Team

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