Buying your first home is exciting, but it can also be quite nerve wracking. This is especially true if you are a first time homebuyer. Because you have never purchased a home before, you might be wondering what to expect, or if there is anything you should do before you sign on the dotted line for twenty or thirty years’ worth of mortgage payments. Here are four questions that you ant to be able to answer. They will make the pre-buying process easier where your finances are concerned.
- What is your credit score?
Your credit score is one of the most important factors when trying to qualify for a new home loan. Your credit score will affect the terms and interest rate of your loan. Ask the realtor who you are using to look for a home about where you can get a free copy of the report. Then look closely at the information listed, keeping an eye out for mistakes, collections, unpaid accounts or any other problem areas.
- What is your current budget?
How much money do you spend each month on necessities? How much extra do you spend on indulgences? Do you have any money left over at the end of the month? What adjustments can you make to better afford a house payment? An income and expenditures sheet is extremely helpful here.
- Do you have the necessary documents?
Your mortgage lender will ask for specific documents that give an idea of your current financial status. These documents include things like your past couple of pay stubs, two years’ worth of W-2’s and tax returns, and a few months’ worth of bank statements – even blank pages are required during this step.
- Do you know how much you can afford?
You should know how much you can spend on a new home before going through all the steps with the mortgage lender. This will help eliminate any surprises. A good rule of thumb is that you should spend no more than 30 percent of your and your partner’s combined gross monthly income on a single house payment.
Figuring Out the Down Payment for Your New Home
Are you prepared to scrape a down payment together to buy a new home? Programs exist to help you know how much you qualify for and other financial situations that you might face. Each state is different, so what works in California might not work in Texas, for example. However there are some federal grants that create housing opportunities that are affordable for everyone.
When you are ready to start the home buying process, talk to your mortgage lender first. If you do not have one in mind, then check with family members, co-workers, and friends and acquaintances for recommendations. Ask them for their advice on anything you are not clear about, and for other tips that you should look out for as you plan to buy your first home.