Congratulations! You are thinking about purchasing a home! I'm going through it right now, so I decided I'd share my experiences and knowledge while it's fresh for anyone else looking for information and tips to make their experience as easy as possible.
This is something you really want to prepare for. So I came up with a list of important things to think about and do before you even go in to apply for a home loan. Hope you find this helpful!
Save ALL important documents!!!
I made the mistake of not keeping a portfolio of these documents. When it came time to gather the paperwork, it was a pain to look through all my disorganized papers in my cubby and other various places in which I may or may not have placed them. I wouldn't be surprised if they ended up in the trash to be completely honest. When we weren't ready to purchase I wasn't thinking ahead of what paperwork I would need down the line. SAVE ALL YOUR PAPERS IN A SPECIAL BINDER!
You will need:
2-3 years of most recent tax returns
2-3 years most of most recent W-2s
2-3 months of most recent bank statements
2-3 most recent Retirement Funds statements
Any other sources of income you are receiving such as social security, etc.
Have finances in order: Work on your credit score- 720 is where you're trying to be for a good interest rate but 640 is MINIMUM!
Pay off debt (car loans, student loans)
Pay down credit cards
Stay on time with payments
Don't open or close any major accounts too soon before purchasing
Keep in mind that closing a credit card account lowers your credit score a little bit because your available line of credit goes down. I cancelled mine anyways because I kept using them and I just wanted to get rid of the temptation which was killing our budget. I did keep one that had the largest line of credit for emergencies and to keep building my credit.
My husband and I are attempting to sell our second car. We know that having 2 car loans is going to stretch us too thin. Plus, he drives his work truck to work and we have our family car for everything else. Selling it will get rid of the loan and open up some money in the budget to put towards our mortgage.
It's important to figure out what to cut and where you can be wiser with your money before you even begin the home buying process. Really, that actually is step 1 of the home buying process, then you can figure out pre-approval and a real estate agent.
We had been working on our budget for at least 5 years to get us to a responsible point where we felt confident in purchasing a house. So the sooner you can get started on maintaining a budget, the better! You're going to need to put as much money into savings as possible for your down payment and closing costs. Have your money in order!
How much can you afford?
Go on Zillow or anywhere else you search for homes and check out the mortgage calculator. You can mess around with the numbers to see how much the monthly mortgage will be based on the price of the house, how much you put down, if there's an HOA, property taxes, and insurance.
Note* You'll need to pay Private Mortgage Insurance if you're down payment is below 20%.
You can play with the numbers and see what price gets you to a comfortable monthly mortgage and then go from that price.
You may be approved for a loan that is above what you can realistically afford.
We were approved for $100,000 more than what we could actually afford, and we are currently looking for even 20,000-30,000 less than that price to be comfortable with our monthly mortgage.
Don't forget utilities!
I live with my mom and we don't have to pay for the main utilities. So that's another added expense that we are looking towards after purchasing. Don't forget to include that in your budget when deciding what you can afford!
Gas/Electric
Water
Trash
WIFI/Cable/Phone
Savings
You will need furniture when you buy a home. Do you have money saved for that?
You will also want an emergency fund BEFORE you purchase, because......life happens! Be prepared and have the peace of mind an emergency fund offers.
Find your Real Estate Agent
We applied for pre-approval once before we had an agent and then once with an agent. We got nowhere the first time, like they didn't take us seriously or something. We didn't even get a meeting or an approval letter.
When we applied the second time after having our agent who recommended this new mortgage broker to us.... WOAH! I wish I would've started here first! My real estate agent helped refer me to a trusted mortgage broker and gave me pointers on the steps and what to do first.
I ended up really enjoying the mortgage broker and the ease, speed, and professionalism I had with sending the paperwork, setting up an appointment, and communicating with us all along the way. She was able to send the pre-approval letter over to myself and my real estate agent right after the meeting. From the time I contacted her to the time I got the letter it was less than 2 weeks! AMAZING!
A good real estate agent will help you with the entire process, so make sure you find one as soon as you are serious about beginning the process of home buying.
Make a Wish List
Sit down with your spouse and maybe your kids and write down all the important wishes you'd like for your dream home. On mine I had down a pantry, 2 full bathrooms, 4 bedrooms, a nice kitchen with a bar/island, a fireplace, central cooling. My husband wanted a man cave area and the layout of the home was important to him- he preferred 2 stories and a flow to the house, not just open concept. Having a wish list will help you focus in on homes that come up on the market that have your ideal characteristics.
Plus, this will help you not get too excited on a home, then you show it to your spouse and they tell you they hate it for every reason YOU love it for. Really disappointing! Go over these things before house shopping.
You'll be able to share your wish list with your agent as well so they can gather listings that suite your needs and wants.
Dial in on an area you are looking at purchasing in as well, that's good to know because different areas have different taxes and such. And to get a thorough estimate for closing costs, it's helpful to have the city so they can look up correct tax rates for you.
Prepare your "FUTURE HOME PORTFOLIO"
In the resource library on my site, I have printouts for you to start your own Future Home Portfolio. In this, you will keep all information regarding your home purchase, fom a list of future expenses to a list to gather business and schools in the area. Place all paperwork and documents that your agent gives you, that you will need to have for a loan- you can even keep a savings plan, and anything else that pertains to your home purchase such as your wish list, home sales flyers from open houses, and whatever else.
Here is mine, Check it out!
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Listen to Tips for first time homebuyers on my podcast
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