Buying a home may be overwhelming, frightening, and frustrating. For most people, a home is their biggest investment. Purchasing a home can lead to an emotional roller-coaster. But with a little help and guidance, you can overcome the obstacles and manage some stress.
Where to begin?
To start, first look at your own financial situation. What is your credit score? Your credit report is very important. It effects many aspects of the mortgage, most importantly, interest rate, payments, and fees. The Fair Credit Reporting Act requires each of the three credit report companies (Equifax, Experian, and TransUnion) to provide you with a free copy of your credit report once every 12 months. According to the Federal Trade Commission, only one website is authorized to fill orders for the free annual credit report you are entitled to under law. That website is Annual Credit Report. A credit score above 700 will get you a good deal on your mortgage. If your credit score is lower, you may be required to pay higher fees or down payment.
Secondly, reach out to a mortgage banker, also known as mortgage broker, bank, or lender. To properly search for a home, you need to know what you can afford. The lender will inquire about your financial situation. They will request tax returns, employer, employment status, bank account records, outstanding loans, and credit cards. Based on your debt to income ratio, the lender will provide a “pre-qualification” letter. This letter is to be shared with your real estate agent, and will specify your down payment, mortgage, and total purchase price.
This leads me to the last obstacle, the down payment. If you are a first time buyer, there are mortgage programs which minimizes your down payment to 3% or 5% of the purchase price. If applicable, make sure your lender is aware that you are a first time buyer.
If you are an experienced buyer, assume a down payment of 20.0% of the purchase price. If your down payment is less than 20.0%, then expected to pay Private Mortgage Insurance of PMI. PMI is a monthly fee on top of the PITI payment.
These simple steps will get you closer to purchasing your home.
