5 Easy Steps for Homebuyers
Homeownership is such an exciting milestone in a person's life! Whether you are newlyweds, retired, or anywhere in between, it's refreshing to have a new space to call your own. The home buying process can go as slow or as fast as you care to move, but one thing is for sure, the more your finances are in order, the sooner you can take that exciting step towards homeownership. However, before you jump in, our financial experts laid out five steps in preparation for your future home quickly, efficiently, and confidently.
Step 1: Organize your Finances
Before even looking at a home, we recommend laying out your current debt to income ratio. Identify where you can save money and track your everyday expenses accordingly. Creating a budget can help you prepare for potential costs, like a down payment. Read '5 Steps to Increasing Your Savings' to help you get organized.
Organizing your finances also includes managing paperwork. When it comes to the actual mortgage application, you're required to provide paystubs, W2's, bank statements, freelance or self-employment income documents, and copies of your previous tax returns. Create a checklist of the necessary paperwork you need during the application process so when you find your future home, you're more than ready!
Step 2: Establish Credit
You can optimize your credit by paying off debt and keeping at least one card open longer than six months. The longer you keep a card open without any delinquent payments, the better your credit becomes. Need to establish credit? Our financial experts can help you obtain a credit card or personal loan to build a healthy credit foundation. By paying the card in full each month or steadily paying back the personal loan, you'll build credit and qualify for a reasonable mortgage rate.
Besides credit cards, you can establish and build credit with personal loans, student loans, rental payments, and car loans. Keep a personal log showing on-time payments to see the impact you're making to decrease your debt-to-income ratio. The more on-time payments you make, the greater chances you will qualify for a lower interest rate on your mortgage. You're not just building your credit by showing yourself you're making gains; you're also building confidence to move forward towards your dream home!
Step 3: Determine How Much House You Can Afford
Now that you have a financial foundation that you can act on, how much house can you afford? More importantly, how much house do you want to afford? That four-bedroom, three-bathroom home may seem like the perfect house, and someday, it may be, but can you truly afford it after taking a more in-depth look at your finances? To help you determine how much home you can afford, Waldo State Bank has easy to use financial calculators. Having a number in mind while you're house hunting can help you find one within your means and enable you to live more comfortably.
Step 4: Research Mortgage Rates
Finding the best rates for your financial situation can be a daunting task, but having a better understanding of the types of real estate loans, fees associated with the loans, and the pre-qualifying and pre-approval process will make the process easier to walk through.
Waldo State Bank also has financial calculators that can help you understand different mortgage scenarios, including determining which mortgage would be best for your financial situation.
Step 5: Get Pre-qualified or Pre-approved: Which Is Right For You?
Pre-qualification gives you an estimate of what you can borrow. Pre-approvals tell you what you can actually borrow. They also state your eligibility for the specific loan amount. To help you further understand real-estate loan terminology, read our blog 'The Top 5 Things You Should Know About Real Estate Loans'.
The housing marking is hot right now so this step is imperative! After getting your free pre-qualification with us and determining the right mortgage loan for your financial situation, the next step is getting pre-approved.
Sellers and realtors look at pre-approvals as an evident sign of commitment to purchasing a home. Additionally, finalizing the mortgage becomes a lot easier, and the transactions can occur quicker. Not only are you making the transaction more manageable for the sellers and realtors, but you're also making it less stressful for yourself.
Bonus Step: Contact Our Financial Experts
Home loans are at a historic low, and we're helping our customers finance their goals of purchasing their new homes. For over 107 years, families have trusted our financial experts to support their families and their homes as their premier bank. Contact us today to learn more about how we can make your dreams reality.