At the age of 29, Shane Houser bought his first home. Tired of throwing away his money towards rent payments, he had his mind set on the financial benefits of owning a house. With the housing market trending in his favor, the timing seemed right. With over $80k saved up, Houser began his search for his dream home, and within 3-4 months, he closed out the deal. Because of the amount of research and time invested , Houser came into the housing market prepared. If you are looking into your first home, here are some financial prerequisites that people like Shane Houser consider before beginning the process.
Make sure that your credit score is in good standings. Lower scores will either result in high interest rates or a denied application. Banks want to trust that you’re going to be able to repay back the loan and won’t consider someone who is basically living off of their credit cards. Ensure that you are paying your bills on time and not maxing out on all of your credit cards. To the banks, your credit score is indicative of your financial habits.
To limit the risk of borrowers defaulting, many lenders have been placing an emphasis on down payments. When property values rise and fall in the market, the ones that have placed a large amount of money into their dream home are more likely to wait it out until values begin to rise again. A borrower with no money down is likely to just let the house go into foreclosure and walk away with little risk.
Prepare all of the documentation before entering the loan process. If you don’t have the documents required, you could delay or even stop the loan approval process. Speak to the lender that you’re considering and obtain a checklist of what is required for them to continue on with approving you. Obtaining pre-approval could help when you’re making offers, especially in competitive markets. When you speak to a lender about being pre-approved, make sure that they are asking you for all of the documentation as a partial review is pretty much useless and won’t help you out.
By emphasizing financial readiness, you’ll be entering the market confident and prepared. Be sure that your finances are in order and that you’ve thoroughly gone through all of the numbers that you’ve crunched to get one step closer to buying the home of your dreams.
Kuba Jewgieniew is the CEO of Realty ONE Group, a real estate firm brokerage with over 7,500+ agents and 60+ offices. Find your perfect home. Speak with one of their agents today!