Are you ready to buy a home?
Some people start with just browsing homes online. They see what’s available -or what’s not. Some might determine that they probably can’t afford a home, while others guesstimate they can afford more. Your first step is to turn to a trusted lender and learn exactly what your options are.
1. Have you checked your credit?
Many credit card companies provide your credit score and this can be a great starting point for assessing your financial situation. A good online resource to check your score is CreditKarma.com.
Experts encourage you to check your credit report once a year anyway, so it’s a good idea to stay informed. There are 3 big credit report companies (Experian, Equifax and TransUnion) and you have a right to view your credit report for free from one of each of the companies. This will also let you know if you have any “blemishes” or errors that need to be corrected.
Here’s a general guideline for how your credit score may affect your ability to secure a mortgage loan:
- 570 – Seek out professional credit repair.
- 580 – Fixable but it may take a few months of credit work.
- 600 – Getting closer.
- 620 – Very possible but you may have limitations.
- 640 – Let’s rock & roll!
2. Have you been pre-qualified with another lender in the past 6 months?
If yes: great! You are probably still qualified to buy.
If you tried but did not qualify, did you take the suggested steps from the other lender? If not, you may still have the same challenges.
If you have not spoken with a lender at all, getting your financial baseline is where you NEED to start. I see a lot of buyers starting their home search with a budget of what they THINK they will be approved for. Since most consumers are not aware of how credit companies and banks/mortgage providers are evaluating their credit scores, or score certain kinds of income, you might be in for a surprise if you don’t speak with a lender before you start with your home search.
3. Are you employed or Self-Employed?
- Two years same line of work
- How long have you been in your line of work?
- If you are an employee: you do not have to be at your current company for two years, but you need two years of consistent experience in your field. Schooling counts toward experience.
- Two year history.
- You must be in your current company for a minimum of two years.
- Check out our detailed information about mortgages for small business owners.
4. Do you have a down payment?
No: Most loan programs require a percentage of your own funds. You will need to figure out where your down payment is coming from.
- Save up money
- Borrow from 401k
- Gift from close family
- Note: REALTORS, lenders and sellers are not allowed to contribute toward your down payment, but might enable you to provide a down payment by giving you a credit towards your closing costs (all in accordance with your lender).
Yes: What is the percentage? There are certain requirements per loan type.
- Conventional = 5% or more
- FHA = 3.5% down payment or grant(s), down payment assistance
- VA = 0% down payment
- USDA = 0% down payment (only available in certain areas of the County)
- Fannie Mae/Freddie Mac
Based on this information, are you ready to buy now or later? Or did you confirm that you can move forward with your home purchase? Make sure you give me a call so I can help you get started on your journey and get you to your goal: Home Ownership. Click the picture below to get contact information for 3 local mortgage professions and information to help you choose the right mortgage loan for you.