The ability to buy a home starts with considering how you are going to pay for it. Will you pay cash for the entire amount or do you need a loan? Each has its own benefits and necessity.
Things to consider when you are looking to buy a home and financing with a mortgage:
- How much can you afford to pay each month and be comfortable?
Meaning - if you make $3000 gross income per month (before taxes), then you may be comfortable with $1000/month for cost of owning a home (not including electric, water/sewer, trash, cable). This can be more or less depending on how much debt you carry and pay each month.
- How is my credit? Is it above 620?
Meaning - use one of those reputable free credit report sites to pull your annual free report to see what's going on. You will want to see ALL 3 major credit bureaus - Equifax, Transunion, and Experion. This is called also a tri-merge report. It doesn't hurt to pull your own credit. But multiple pulls by credit issuing companies (banks, mortgage brokers, credit card companies) will start to bring down your score. For a majority of buyers, a 620 credit score is needed for an FHA loan. There are some lenders out there doing sub-prime credit scores of 580 but there are higher fees and rates associated with it. The better your credit, the more opportunities are available.
If your credit is in the no so good range, there are several non-profits in the area that do free credit counseling.
DO NOT PAY FOR "CREDIT RESTORATION". Many companies offering this, charge several hundred dollars and don't really fix anything. They challenge items on your report but if it fails to be removed, you are out several hundred dollars and your credit is still in the crapper. One of the reputable non-profit groups is the
Tampa Bay CDC (Community Development Coalition) located in Clearwater. Once they get you on the right road, they also offer home buying classes, down payment assistance programs and mentoring on qualifying for a loan.
- How do I get qualified for a mortgage?
Before starting your home search, you need to get pre-approved for a mortgage. This document is crucial when submitting an offer because it proves to the seller that a lender has reviewed your situation and you are financially solid to be given a mortgage in your approval range. You can go to where you do your banking, but not all banks are created equal. I do recommend choosing a mortgage broker and a bank to get approval from. With my clients who have a pre-approval or not, I always have them get approved from my lender of choice because I know my preferred lender can get the job done and they do a thorough approval process where you are not left holding the bag if things go south. They've also saved many a deal when 'Banks to Big to Fail' fail to stand by their approval and deny buyers a loan or take too long in underwriting where the seller will not grant an extension. For me, there is no pressure to use my lender of choice, it's a second opinion and back up if needed.
- What documents do I need for my pre-approval?
You will need:
- Your Drivers License & Social Security Card and Green Card/Permanent Resident Card if not a US Citizen
- 2 months worth of paystubs from your employer(s)
- Social Security or Pension Award Letters
- 2 years of tax returns (all pages)
- W-2s or 1099s for the past 2 years
- If self employed, two years business tax returns and YTD profit/loss statement
- Bank statements for the most recent two months (all accounts/all pages)
- Mortgage statements for any properties currently owned/retained
- Other income documents (Child Support/Alimony)
Once you get your pre-approval, now you know your budget. And it's time to hire a realtor. Depending on the type of property you are looking for may change your budget and your realtor can help you establish a good budget around this. A prime example is a condo. Condo maintenance fees have a huge variable from property to property and you will most likely have to lower your budget to accommodate this maintenance fee. Or a home in a flood zone has a much higher cost on insurance.
You can also start searching and seeing what's in your price range. I work with lots of Buyers and Sellers. I specialize with 1st time home buyers and down payment assistance programs. So to check out me and homes available in Pinellas, Pasco and Hillsborough County, visit my website
http://RebeccaTheRealtor.info.
