If you’re feeling overwhelmed about the thought of buying your first home, you’re not alone. Most people have more questions than answers at this stage. The following tips will give you the confidence to search for and make an offer on the house of your dreams.
What Features Do You Want in a House?
People can burnout on house hunting in a hurry when they don’t have a clear idea of what they want in the next place they live. There’s no right or wrong answer, only what works for you. It’s helpful to make a list of non-negotiables as well as things you prefer before going much further with the process. If you’re married or live with a partner, be sure to include him or her in this process. You might consider each making a separate list and then compromising on what to include on the final list that you take along when viewing homes.
Select a Mortgage Lender
If you already have an established relationship with a bank that also provides mortgage loans, it makes sense to check there first. If not, be sure to research at least three different lenders in your area. The lenders you speak with should be able to tell you the interest rates and loan terms their organization offers. Some of the best ways to choose your mortgage lender include asking about specific experience with your type of home loan, checking online reviews, and comparing loan estimates each person provides you.
How to Get Pre-Approved for a Mortgage
One advantage of getting pre-approved for a mortgage is that it gives you a budget when you’re ready to start looking at houses. Most financial institutions have an online pre-approval application to make the process easier. You should plan to gather the following documentation before you start:
- Verification of income: If you work for an employer and receive a W2 each year, be sure to save your last two paystubs. Mortgage lenders are looking for how much you regularly earn as well as your year-to-date income. They are most interested in seeing a stable pattern of income rather than a one-time bonus or commission.
- Proof of self-employment income: If you work for yourself, you will need to submit income tax or profit and loss statements for the last two years along with bank statements. Lenders tend to see self-employed applicants as a higher risk, so be sure to provide as much documentation as possible to prove income stability.
- Employment verification: This should include the name of the company, contact person, address, and telephone number for all jobs you have held for at least the past two years. While lenders understand that some job changes are outside of your control, they prefer employment stability to someone who changes jobs frequently without a good reason.
- Residence history: Lenders need you to list the address of anywhere you have lived for at least the last two years. A pattern of stability is important here also, although lenders understand that those who rent will move more often than those who own a home.
- Bank account information: This should include the financial institution and its contact information as well as the account numbers for checking, savings, and investment accounts.
- Tax documents: Both self-employed and traditionally employed people should submit copies of tax returns for the past two years.
- Monthly expenses: Do your best to estimate your monthly rent or mortgage payment, food budget, car payment, and other regular monthly expenses. Lenders are looking to see that you can afford the new house payment based on your income and typical expenses.
- Other assets: This would include stocks, bonds, IRA accounts, or any other high-value item.
- Gift letters: If someone is providing you with money you don’t have to repay to meet closing costs, list their name and contact information.
After receiving your application and documentation, your lender will verify the information provided and obtain a copy of your credit history. It’s a good idea to request a free copy of your credit report for yourself, which every consumer can receive once per year. This gives you the opportunity to see if contains any errors and request to have them corrected so it doesn’t affect your ability to obtain a mortgage loan.
Here to Help Your Home Ownership Dreams Come True
The Lafayette Team is excited to help you locate and purchase your first home. Please contact us today to learn more about how we can help.