Nicole Rivers - NMLS 1150526
When you hear people say that home ownership is a 'journey' it's because there are multiple steps vital to the purchase. Each action is essential to purchasing a home with a mortgage (purchasing with cash is a bit different) making the process more like meticulously following a detailed cake recipe than the ease experienced with purchasing, well, almost anything else.
Armed with this knowledge, there are things you can do in advance of actually applying and shopping for a home that will ready you and your finances for the journey.
Get Real About Your Credit - Your are entitled to one free copy per year from this site. Since lenders use the FICO score to determine mortgage qualification it's a good idea to know your FICO score as well. This will let you know if you are in the ball park to qualify for available loan products.
ACTION: - Get a free copy of your credit report from annualcreditreport.com. Visit myFico.com for one time download of your current scores. The fee for this service is about $60.00. A small investment security of knowing where you stand with credit before you sit with a lender. Consult with a credit or mortgage professional about the status of your credit and what might need to be addressed prior to applying for the mortgage.
SAVE, SAVE, SAVE - Even if you've saved enough for the down payment you'll want to have a reserve of funds to cover the additional expenses that can come with home ownership. Remember, there is no Super or Management Company to call if the heat stops working, or the sink backs up. As the owner of the property repairs, upgrades, and renovation are your responsibility. If you're considering a multi-family home for your primary residence you will need to have cash reserves of 3-6 months of monthly mortgage payments.
ACTION: - Decide on the areas you are interested in purchasing and find out what taxes are like in the area. Determine how much you would like to allocate towards the purchase of a home considering the down payment, closing costs, and upfront costs like the appraisal. Determine if you will get a gift to help with the down payment and how much it will be. Speak to your financial adviser, or CPA about any retirement withdrawals you intend to take and find out about the tax implications.
Put Your Documents In Order - A large part of qualification, processing and underwriting a mortgage is reviewing and verifying information that is provided by the borrower. Over the course of the process, your loan officer will request tax returns, W-2s, bank statements, pay stubs, and other documentation that will give him or her insight into who you are as a borrower and help them tell that story and establish why you are a candidate for a loan to the underwriter, who ultimately approves the file.
ACTION: - Before you apply for the a pre-quallification or pre-approval, gather all of your financial information. Research lost documents. Scan and save information in a safe place so that it is readily accessible and available to transmit to your lender when needed.
Please Note: This article is provided for illustrative purposes only. It is not an offer or commitment to lend money, and it is not an advertisement for a specific mortgage or a specific interest rate. Contact me to run the numbers for your situation.