October 26th, 2017 9:26 AM by Jackie A. Graves
You've decided to go for it. You know mortgage rates are
Buying a home can be thrilling and nerve-wracking at the same
time, especially for first-time homebuyers -- it's difficult to know exactly
what to expect.
Take these five steps to make the process go more smoothly.
credit score is among the most important factors when it comes to qualifying
for a mortgage.
addition, the standards are higher in terms of what score you need and how it
affects the cost of the loan," says Mike Winesburg, formerly a mortgage
planner with McKinley Carter Wealth Services in Wheeling, West Virginia.
your credit reports for mistakes, unpaid accounts or collection accounts.
because you pay everything on time every month doesn't mean your credit is
stellar. The amount of credit you're using relative to your available credit
limit, or your credit utilization ratio, can sink a credit score.
lower the utilization rate, the higher your score will be. Ideally, first-time
homebuyers would have a lot of credit available, with less than a third of it
damaged credit takes time. If you think your credit may need work, begin the
repair process at least six months before shopping for a home.
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first-time homebuyer should have a good idea of money they owe and money they
have coming in.
I were a first-time homebuyer and I wanted to do everything right, I would
probably try to track my spending for a couple of months to see where my money
was going," Winesburg says.
buyers should have an idea of how lenders will view their income, and that
requires becoming familiar with the basics of mortgage lending.
instance, some professionals, such as the self-employed or straight-commission
salesperson, may have a more difficult time getting a loan than others.
self-employed or independent contractor will need a solid two years' earnings
history to show, according to Winesburg.
applying for mortgages, you must document income
mortgage lenders will request two recent pay stubs, the previous two years'
W-2s, tax returns and the past two months of bank statements -- every page,
even the blank ones.
it has to be every single last page, I don't know. But that is what they want
to see. I think they look for nonsufficient funds or odd money in or out,"
says Floyd Walters, owner of BWA Mortgage in La Canada Flintridge, California.
you already know how much you can afford to spend before the mortgage lender
tells you how much you qualify for. Bankrate's "How much house can I
afford?" calculator will help.
calculating debt-to-income ratio and factoring in a down payment, you will have
a good idea of what you can afford, both upfront and monthly.
there's not a fixed debt-to-income ratio that lenders require, the standard
dictates that no more than 28 percent of your gross monthly income be devoted
to housing costs. This percentage is called the front-end ratio.
back-end ratio shows what portion of income covers all monthly debt
obligations. Lenders prefer the back-end ratio to be 36 percent or less, but
some borrowers get approved with back-end ratios of 45 percent or higher.
takes effort to scrape together the down payment.
are programs that can assist
buyers with qualifying incomes and situations.
helped arrange assistance loans for $10,000, which are interest- and
payment-free, and forgivable after five years. Although considered a loan,
they're more like grants. Other programs can provide up to $40,000
interest-free," Winesburg says.
speak with mortgage lenders when you're starting the process. Check with
friends, co-workers and neighbors to find out which lenders they enjoyed
working with and ask them questions about the process and what other steps
first-time homebuyers should take.
By Sheyna Steiner – To view
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