Tips and Tricks to Help You Streamline Your Home-Purchasing Process
Home ownership is a critical decision that everyone needs to make. For most people, the ambition to own a home surpasses all other goals, and it motivates them and influences their lifestyle and how they run their businesses. Buying a new home can be a thrilling experience. However, you could opt to build a house instead of buying. While building a house can seem tedious, using reputable real estate firms such as Draper Home Builders can help you build a great condominium or family home at an affordable price. The firm allows you to finance your home ownership through a home mortgage. Follow these five steps to smoothen your home-buying experience.
Check Your Credit
Credit score plays an integral role in determining your qualification for a loan. The standards rise based on your credit score and its effects on the grant. The first step to qualifying for a loan is to scrutinize your collection accounts, financial mistakes, and unpaid accounts. Paying your monthly bills on time doesn't mean you have an excellent credit score. Your credit score could as well be hurt by your credit utilization ratio, which is the comparison of the credit you're using against your available credit limit. Your credit score rises as your utilization rate declines. Ideally, lenders require first-time buyers to have a higher credit score, and less than a third of their available credit should be utilized. You may need to work on your credit score if you owe your lender more than you earn. You could start tiding your credit score a few months before you start searching for a house.
Get Qualified
You could factor in down payment or calculate debt-to-income ratio to get an idea of the house you can afford. A standard rule for mortgage lenders is that you shouldn't spend more than 28% of your gross salary on monthly housing expenses. Conversely, the back-end ratio which includes car loan, housing expenses, and credit cards should not consume more than 36% of your gross income. However, some borrowers qualify for a loan even with a back-end ratio of 45% or higher. The key is to find out how much you can afford before approaching a mortgage lender.
Prepare Your Documentation
You must present proof of income and taxes when applying for a loan. Mortgage lenders often request bank statements, tax returns, W-2s forms, and pay stubs from the past two months. Lenders want to see all your documents, even the blank ones. Preparing your financial statements ahead of time can save a lot of time.
Seek Financial Assistance
It takes efforts to arrange for financing. However, there is plenty of financing programs that can help first-time homebuyers qualify for a loan. You could apply for assistance loans that are interest-free and forgivable after a given period. While these programs are considered a loan, they're similar to grants. While each state is different, most of these grants are given by the Home Investment Partnership Program. It is a federal block grant designed to help people get affordable housing. Alternatively, you can check with relatives, friends, and co-workers to link you up with reputable lenders. You could start by asking what it takes for a first-time homebuyer to qualify for a mortgage loan and how to improve your credit score.
Evaluate Your Assets and Liabilities
Perhaps your payments might be up to date and you might not be owing any lender. Whether you are on a shoestring budget or have a lot of monthly left over, you need to know how to spend your money. First-time homebuyers should know how much they owe lenders and the amount of money they earn every month. It is critical for first-time homebuyers to understand a little bit about monthly cash flow. You could track your expenditure for a couple of months to understand your cash flow. Moreover, understanding the basics of mortgage lending gives you an idea of how lenders will view your income. For example, you could have a harder time qualifying for a loan if you work on straight commission.
