There are many thigs to be thankful for in 2018. In the coming weeks I’m sure you will be bombarded with new year’s resolutions ideas, so I wanted to get a jump on things and publish some tips if your 2019 New Year’s Resolution is to buy a home.
Here are 5 things to focus on:
Credit - You can get a free copy of your credit report from Annual Credit Report or have it checked on various aggregator sites. Keep in mind a mortgage credit pull is usually 20-25 points lower than the highest score you see on these sites. When it comes to your FICO scores, the higher the better in terms of qualifying for various long programs and getting the lowest interest rate. Try to pay all your bills on time. If you are paying bills by paper check it helps to set them up directly from your bank account so you don’t have any lates. Try to keep your credit card revolving balances below 10-15% of the maximum limit.
Income – Banks and lenders like to see a two-year job history at work. Many Cape Codder’s work seasonal jobs, collect unemployment or work two jobs. Typically, you will need to be on both jobs for two years or have a history of collecting unemployment in order to use that to qualify. Bonus and Commission can usually be counted if there is a two year history.
Downpayment – Try to save up as much as you can for a down payment and or closing costs. There are a variety of home loans that are low down payment scenarios but keep in mind the less you put down, the more you will borrow and that will be reflected in your monthly payment. Gift’s from immediate family members are allowed as well and can be used to cover the down payment and closing costs. Soon to be homeowners should budget money for the home inspection, appraisal, closing costs, the down payment and homeowner’s insurance.
Pre-Approval – “The excitement is in the home, not the loan.” However one important step is to meet with a mortgage banker to determine your exact pre-approval before you go home shopping. With income documentation and a credit pull, most mortgage lenders can determine your price range of homes you should be shopping in. Pre-approval letters are typically good for 90-120 days.
Paperwork – At a minimum you want to be mortgage ready once you find that dream home. That means you want to keep track of things like Federal 1040 taxes, w2’s, 1099’s, bank statements, paystubs and if your self-employed you want to advise your accountant that the lender will be reviewing the taxes from the prior two years to determine the net, usable income.
Historically interest rates are still low and prices of homes look cheap compared to other parts of the country. Why not make buying a home your 2019 New Year’s Resolution.
Feel free to comment, email me or call me if you have any questions.