Preparing yourself for a home purchase is very important. When you are investing in one of the biggest purchases of your life, you want to make sure you are ready. Here are things to consider that may help:
Look over your Financial Situation
A. Check your credit. Run your credit (if you haven’t in the last 3 months); you are entitled to a free credit report once a year. There are online sites such Credit Karma who do this for free, or you can even look into creating an account with one of the three big credit Bureaus (Experian, TransUnion, Equifax). Knowing your credit score will give you an idea if you are in good standing to buy a home. You will also be able to see if there are any issues on your report that you need to take care of. Certain issues can prevent you from buying a home at this time, and remember too, the better your credit score, the better rate you will qualify for.
B. Gather information on all of the monthly income you generate by collecting documents such as W2’s, tax returns and recent pay stubs. Your lender will look at your gross monthly income as the source for qualifying you. Your gross pay is the amount you receive before any deductions (federal and state taxes, social security, etc.). If you are not receiving any income, it is probably not the best time to look into buying a home.
C. Make a list of all your monthly payment obligations. This includes all credit card payments, student loans, car payments and any other loan balances (you will see these on your credit report). You do not necessarily need the utility bills at this time because your lender will not use them for qualification.
D. Prepare a budget based on how much of a mortgage payment you believe you will be able to afford. This may not necessarily be the amount you will qualify for, but it a good first step in understanding based on your monthly expenses, what you feel confident in being able to pay.
E. Have a game plan for your down payment. Find out how much money you plan on using for your home purchase and if you will be using money from your checking/savings accounts, a retirement account, money inherited or even gifted from a friend or family member.
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