5 Things to do FIRST as a First-Time Homebuyer

If you’re considering buying a home for the first time in the near future then it’s time to get your finances in order! You can avoid the many stressors first-time homebuyers face by taking preemptive action before the big purchase.

 

  1. Obtain a copy of your credit report.

One of the first things that lenders assess in a homebuyer is their credit. Your credit will be evaluated based on your FICO score. Ordering a copy of your credit report will help you get an idea of where you stand. Annualcreditreport.com offers one free credit report each year through one of three national credit-reporting agencies on their site. Knowing this information will also help you when looking around to apply for a loan.

 

  1. Take care of any discrepancies on your credit report.

Any inaccurate information in your credit report can negatively impact your credit score. You can file a dispute with the credit reporting agency for free if any information on your report in incorrect. Having your accounts in good standing will positively reflect on your credit score so be sure to reduce your debt by paying off the minimum balances on time.

 

  1. Know what you can afford.

Your mortgage principal and interest payments should not be more than 36 percent of your gross monthly income. Planning to spend between 25 percent and 33 percent of your gross monthly income is a good place to start. Mortgage lenders commonly agree paying between 28 percent and 36 percent of your gross income in total debt service is where you should be. Mortgage interest rates are likely to climb before returning to the normal 6 percent or 7 percent and could affect how much you can afford; so remember, keep a close eye on them.

 

  1. Set savings goal.

When you know what you can afford the next step should be figuring out how much you need to save. For down payments you will need 3.5 percent, in cash, of the purchase price for an FHA home.

Reducing unnecessary daily expenses can save you big time each month.

 

  1. Read up on current lending guidelines, and gather all the information you need to present to a lender.

Having all of your documentation together will make applying for your home loan much easier. Forms such as your W2, federal tax forms from the previous 2 or 3 years, a months worth of pay stubs, and copies of bank statements are documents to get organized now. You can find current copies of lending guidelines online for Freddie Mac, Fannie Mae, and the Federal Housing Administration.

 

By gathering your documents and getting yourself organized now you can avoid the usual hassles that come with buying a home.

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