First Time Buyer
Buying a home can be thrilling and nerve-wracking at the same time, especially for a first-time homebuyer -it’s difficult to know exactly what to expect. The learning curve can be steep, but most of the issues can be resolved by doing a little financial homework. Also, there are many incentives for first time homebuyers so researching what these are will help you buy more home or make your home more affordable.
Step 1: Know your credit
Your credit score is one of the most important things when buying a home so make sure you understand where you are as far as credit standing goes. Just because you pay everything on time every month doesn’t mean your credit is stellar, however. The amount of credit you’re using relative to your available credit limit, or your credit utilization ratio, can sink a credit score.
The lower the utilization rate, the higher your score will be. Ideally, first-time homebuyers would have a lot of credit available, with less than a third of it used.
Repairing damaged credit takes time and money, if you owe more than lenders would prefer to see relative to your income. If you think your credit may need work, begin the repair process at least 6 months before shopping for a home.
Step 2: Have your assets and liabilities evaluated
So, let’s say you don’t owe very much to creditors and you make all your payments on time. But how do you spend your money? What is your disposable income after you pay all your bills? Do you have a pile of money at the end of the month or are you broke and can’t buy your kids a brand-new pair of shoes even though their toes hurt? Also, first-time buyers should know how we will calculate income. For example, a W2 wage earner may earn a base salary and have commission or bonuses. It’s important to know how these will be calculated and how it will be used for qualification purposes. On the other hand, self-employed buyers will have a different way of determining income.
Step 3: Have you documents Organized
To get qualified quickly and accurately, it’s important to know what documents are going to be needed. Depending on your employment type, different documents may be used for different types of positions. AS a lender, we will always ask for documents pertaining to your income, credit, and equity. Everything is based off a 2-year history so gathering documents for the past 2 years will be very important. Buying a home can take a long time, but knowing what you need and where to find it can save time when you’re ready.
Step 4: Know what you can put down
You must know your finances and know what you can afford to put down on your home. Keep in mind that when you buy a home, it’s smart to have 3 months of reserves in case of emergencies. The rule of thumb is to have 3 mortgage payments set aside as reserves so that in case of an emergency and you couldn’t go to work to get paid, you will still have money to maintain and make your mortgage payment. Depending on how much home you want to buy, Equinox Home Financing offers down payment in 0%, 1%, 3%, 5%, 10%, 15%, and 20% down.