By Virginia Lascara, TowneBank Mortgage
1. Check your credit. A homebuyer’s credit score is a crucial factor when it comes to qualifying for a loan. Before starting the mortgage process, scour your credit reports for mistakes, unpaid accounts or collection accounts. If you find a mistake, write to the credit issuer and the credit reporting bureau and tell them what information you believe is inaccurate, and include copies of documents that support your position, and request a deletion or correction. If your credit isn’t so stellar, you should be sure to start making all your payments on time. Your credit utilization, or how much credit you’re using relative to your available balance, is important to your credit score as well. Keep your utilization score low, only using and only using up to 30 percent of your available credit. Realize that it could take several months to get your credit score back in order.
2. Get your finances together. Keep track of how much money you have coming in each month, and how much is going out. Once you assess your monthly cash flow, you’ll have an understanding of how much you can afford for a monthly mortgage payment. If you don’t like the number you’re left with, think about how you can change your spending habits. Gather all the necessary financial documents, such as your two most recent pay stubs, the previous 2 years’ W-2 forms, tax returns and the past two months of bank statements.
3. Calculate all costs and determine how much you can afford. A lot of first-time homebuyers forget to factor in added expenses to their mortgage payments. Your monthly mortgage payment will include principal and interest, real estate taxes, insurance, and private mortgage if you put less than 20 percent down. Don’t forget to factor in homeowners association dues, maintenance, and higher electric and water bills.
4. Get preapproved. After you’ve discovered what your comfortable spending on a home, talk to a TowneBank Mortgage loan officer to see how much you’re qualified to borrow. By obtaining a letter of preapproval, you can start the home buying process with confidence that you can obtain financing. Plus, you won’t waste time shopping for houses out of your price range. Just remember, just because you’ve been preapproved for a certain amount, doesn’t mean you have to spend that amount.
5. Don’t spend all your cash on the down payment. Although a big down payment can help slash your monthly mortgage payments, it’s important to not deplete your savings account. When something breaks, you need to make sure that you have enough funds to fix it. There are also additional costs associated with buying a house, such as moving costs, utility down payments, or the purchase of maintenance items such as tools or lawn movers.
6. When you’re looking at houses, focus on what’s important. Come up with a checklist of must-haves, and another checklist of nice-to-haves. Make sure you don’t sacrifice a must-have for a nice-to-have. Maybe you’ll have to live without the granite countertops to achieve your perfect location.
7. If you’re buying into a homeowners association, know the rules. Ask the homeowners association for their contract before you make a decision. Your HOA can govern how many or what type of pets you have, what type of alterations you can make, or the color of your home’s exterior. Take a look at their finances, insurance policies, fees, rules and fines, and meeting minutes to gain some insight. If your neighbors fail to pay their fees each month, you could be on the hook for their payments. Ask neighbors about their opinion of the HOA and any concerns they have.
8. Don’t finance any new purchases. Once you’ve been approved for a loan, you should not take out any new loans or open new lines of credit. You might be tempted to finance a new dining room table or leather sectional for the living room, but doing so could result in higher interest payments or even the loss of your loan. Wait until your loan closes before making these purchases.
Are you thinking about starting the home buying process? Talking to a local lender is a great first step! Contact McKim Beale, with TowneBank Mortgage, at mckim.beale@townebankmortgage.com and he can help get you started.