Where to start?
Buying the home of your dreams can be an exciting yet challenging time, between finding the right home to securing a home loan. When finding the home you want to purchase, we suggest you prepare for the future. As a young working professional, you may want an apartment in a city with easy access to public transit. However, if marriage and kids are in your future, a home in the suburbs with good schools may be a better fit. You should seek a home loan before looking for a property so you know how much you can afford. Generally, you should be able to afford a home that costs about 2½ times your gross annual salary.
What do lenders look for?
In addition to good credit, we recommend you put your best foot forward and sell yourself to the lenders. Include all of the details the lenders may be looking for, such as complete tax returns, a personal financial statement, and additional income. Additional income may include: retirement/social security award letters, interest distributions, K-1 distributions, and/or income properties.
Best practice tips:
- Don’t co-sign on a loan. Often times, folks who are guarantors on a loan face credit challenges from non-payment by the original borrower and/or their debt-to-income ratio may become overextended.
- Use credit wisely. Don’t overuse lines of credit and rack-up high credit card bills, the recommended usage from the credit bureaus is 30%. Also, pay off the each credit card in-full every month. Consistency is key.
- Marriage can affect your loan. Even if one spouse is NOT on the loan because they do not have a source of income, a lender will most likely require a credit check before approving the loan. Best practice is for both spouses to maintain good credit.
- To get the best deal on a home, we recommend making an offer on the 1st Tuesday in the month of January. Fewer people are looking to purchase homes this time of year and the seller may be eager to sell which is why the home is on the market during the winter. It’s also a good day to make an offer because the seller may be panicked they just wrote another mortgage check and no offers were received over the weekend.
- Research trends and follow the market. It’s important to pay attention to the fluctuation of housing prices and interest rates. A home loan can always be re-financed but you cannot change the price that was paid.