You are now in a financial position to apply for your first home loan. Congratulations! This is an exciting time and United Country Hamele is looking forward to helping you find your dream home.
Getting off to a great start home buying requires a few things. First, you must have the ability to obtain credit. Having credit gets you in the door. Secondly it is always a good idea to have a have pre-qualification. Having been pre-qualified for a home loan tells your real estate agent you are ready to proceed looking for a house in your pre-qualified range.
Home Loan 101
Hopefully in your young adult/college years, you did well with credit. Paying the full amount, on time are key in credit reporting. You probably started out with a consumer loan for a car. Maybe you applied for a loan for college or applied and received a credit card- whatever the case, you were building credit. There may be some bumps along that road, however banks still are willing to consider any applicant regardless of your situation
A great credit score is in the range of 690-719. An excellent credit score is 720- and up. Armed with either a great score or an excellent score you are now ready to visit your local lender. According to FICO, the average FICO® score in the U.S. as of April 2017 was 700.
Paper work and more paper work
Thanks to the 9/11 terrorist attack on America, we have the Patriot Act. Because of the 2008 financial crisis we have Dodd-Frank Act. Together these acts have made for more paper work and hoops to jump through- some with good intentions but fraught with regulatory overload.
This all being said so that you are understand why all the paper work and we now can move onto the good stuff!
Generally a couple or individual starts off by “qualifying” for a loan. This is relatively easy, just by stopping in at your local community bank or fill out the preliminary paperwork online before visiting the bank’s residential lender. Either way will work.
When you finally have an appointment set with your local community bank residential lender, be sure to bring the following with you:
- 2 forms of identification- one will be your VALID driver’s license, the other will be your social security card
- Past two years of W2’s
- Pay stubs
- 2 months of bank statements
- Past two years of your prepared taxes
Just So You Know
Lenders and realtors alike know you are excited to get started looking for your home. So be aware that the filling out the application for a home mortgage takes time. Then your application goes through an approval process and it will be determined if it is approved or denied. Keep UC Hamele on speed dial because once you receive approval we can hit the home market running and find you your dream home.
Now that your lender has all your necessary information, they will begin to calculate the debt to income ratio. The debt to income ratio divides your monthly debt by your pretax or gross income. Lenders like to see your debt to income ratio at 36% or less. There are some higher percentage exceptions that apply.
Once it is established that you meet the required debt to income ratio you will be pre-qualified by your lender to seek out homes in a determined price range.
As realtors at UC Hamele, it makes our job easier when our home buyers are pre-qualified. We are able to work more effectively and efficiently, getting you into a home that fits your budget and lifestyle.
Down Payment or No Down Payment?
Now that you and your UC Hamele realtor has found you a wonderful home you will need to call your lender and they will walk you through the process of putting your 20% down or finding you a program that works for your circumstance, 20% gives you the most leverage, less is still doable.
Ideally, your lender wants you to have 20% down. Having the 20% down shows your lender that you are capable of financial responsibility and that “you have skin in the game”. But if having a 20% down is a challenge, your lender will have some great programs to help you out.
In our coming issues, we will explore various programs for helping you buy your first home, home hunting pit-falls that UC Hamele will help you avoid and closing on your new home. UC Hamele looks forward to working with you through this exciting process.