Buying your first home is an exciting but often overwhelming undertaking. Whether you have been renting or living with friends and family, taking the leap into home ownership requires education and commitment. While buying a home beats renting in most circumstances, it’s not right for everyone. Before diving in, be equipped to answer several important questions.
The first time home buyer checklist below is designed to assist in answering important financial questions as well as clearly define what qualities in a home are critical to you and your family. Taking the time to devise a step by step action plan will allow you to determine whether or not now is the time for you to buy your first home.
First Time Home Buyer Checklist:
Are you employed full time? If so, how are you paid? Hourly, Salary or Commission. Commission or 1099 employees income must be calculated based on an average of your last 2 years tax returns. There are many variables that might affect your net or qualifying income. It is important to discuss your income with a mortgage professional prior to writing an offer on a home. All other employees will need to provide your most recent 30 days’ pay stubs.
Have you been employed within the same line of work for the last 2 years? If not, have you recently graduated with a degree within your current field? A 2 year consistent work history will be required.
Have you filed your last 2 years tax returns? It is now necessary for lenders to request transcripts directly from the IRS. This quality control verification allows your lender to verify that what you have supplied at loan application is the same documentation filed with the IRS. If you have not filed yet, this will create a major delay within the process.
Do you have money in checking or savings that is set aside for the down payment and closing costs? Depending on the type of loan you are qualifying for you may be required to put anywhere from 3.5 – 5% down. Understand the difference between an FHA and VA loan, two loans used frequently by first time home buyers.
Any money used for down payment or closing costs must be verified. You will be required to provide the last 60 days bank or asset statements.
Have you checked your credit recently and are you aware of any negative marks that might impact your qualification? You can order a copy of your free credit report at Annual Credit Report before meeting with a loan professional.
Develop a family budget and determine the monthly mortgage payment you can afford. Having a budget clarifies your mortgage payment comfort level instead of someone else determining that for you.
Familiarize yourself with common mortgage terms before you buy a home.
Be prepared and pull together all of the documents required for mortgage pre-approval before meeting with a loan officer.
Work with a Real Estate Agent that understands the your area and is familiar with the particular neighborhood you are interested in.
Your final and most important piece in the home buying process is loan pre-approval. Meet with a local mortgage professional and determine eligibility before you set your sights and your heart on your first home.