Tips for Purchasing Your First Home

 Posted on April 28, 2016 in Financial Tips

One of the most exciting experiences for a person or for a couple is the purchase of a first home. After years of working hard and saving towards that down payment, it can feel very rewarding to actually sign on the dotted line and become a homeowner. However, the process is not without the occasional hiccup—and headaches. Therefore, following a few tips can help the purchase go smoother.

What is Your Credit Score?

One of the first steps a potential home buyer should take is to check his or her credit. Financial institutions put a heavy weight on a person's credit score when it comes to deciding how much—or if—they will approve a mortgage.

To begin, request a copy of your credit report from the three major credit reporting agencies and look over these reports carefully. Examine your credit reports for any errors. Look for any unpaid accounts or accounts sent to collections. It is not uncommon for a person to apply for a mortgage and then discover that they have an unpaid credit card or utility bill from years ago. You may have forgotten the debt, but the mortgage company will look at those types of entries unfavorably.

If you do find unpaid debt, then make sure you pay it off immediately. Additionally, keep a record to show the bank or mortgage company that you made the payment.

Track Your Cash Flow

Purchasing a home and all the extras—both planned and unplanned—is expensive. It is important to know where the money you earn every month is going to and how much you should have left over at the end of the month. Keep track of exactly where and what you are spending it on.

For potential home buyers who are self-employed or contract employees, keep in mind that lenders will want to see at least two years' worth of concrete earnings before they will consider approving a mortgage.

Have Required Documentation Ready

When you apply for a mortgage, the majority of lending institutions will want to see your two most recent paycheck stubs, the last two months of all your bank statements (including blank pages), past two years' income tax returns, as well as any and all W-2 forms.

Figure Out How Much You Can Afford

It is critical to calculate what your debt-to-income ratio is in order to see just how much you can afford for a mortgage and how much of a down payment you will need to put on the home you choose. Financial advisors say a person should be spending no more than 28 percent of their gross monthly income towards housing expenses.

Once you find your home and qualify for the mortgage, there are still multiple legal issues which may need to be addressed during the home buying process. That is why it is important to have an experienced DuPage County real estate attorney representing you though this process. Call us today to schedule your appointment.

Source:

http://www.bankrate.com/finance/mortgages/5-tips-for-first-time-home-buyers-1.aspx