If You\’re Going to Buy a Home, Here\’s What You Need!

Buying a home is a big decision; in fact, it\’s one of the largest purchases most people make. Since it\’s such a big decision and can be daunting to navigate, how do you ensure that you have everything aligned to begin the process?

So before beginning your search on Zillow, Trulia, or having your broker or agent provide listings from the multiple listing service or MLS in your area or using some other source, you will want to make sure that you are following the steps to set this purchase up for success. 

Now, in an earlier episode, I covered the 7-steps that need to be looked at and changed if you want to purchase a home; as a reminder, those were having;

1. A budget or Plan to Spend
2. Being able to cover all household costs without subsidy
3. Narrowing your focus and steps for a career
4. Remaining in the area for a minimum of two-years
5. Paying off your revolving high-interest debt
6. Building an emergency fund outside of saving for a home
7. Counting the costs of homeownership

Now, these are steps that you should ideally make in order to have peace of mind going into the purchase, but for a bank or lending institution otherwise, they are less concerned about your peace of mind and more concerned as to whether you fit their mold or checklist. 

I found an article by Rocket Mortgage that helped outline the step-by-step process;

1. Income & Employment Status
   1. Be prepared to provide recent pay stubs, W-2s, tax returns, or other income-related documents.
2. Debt-to-Income Ratio
   1. DTI helps your lender see how much of your monthly income is already going to debt so they can evaluate the amount of mortgage debt you can take on.
3. Liquid Assets
   1. A down payment is the first major payment you make on your loan. The amount of money you\’ll need to save depends on your loan type and how much you borrow.
4. Credit Health
   1. Your credit score is based on the following information: payment history, amount of money you owe, the length of your credit history, types of credit you\’ve used, and your pursuit of new credit (*these are the five key areas that are looked at by the rating agencies)
   2. Most lenders require a credit score of at least 580. However, a score of 620 will allow you to qualify for more options. A score above 720 will generally get you the very best loan terms.
5. Willingness/Ability to Live in One Place
   1. Consider your career goals, family obligations, etc.

Now the majority of these, if not all, will go underwriting when a bank or lending institution is determining whether you are a good fit for their program.

CTA:

My call to action is to look at the aspects that provide you peace of mind before purchasing a home and what the lender requirements are so that you are not window shopping without the ability to purchase. 

Citation:

\”Buying A House In 2020: A Step-By-Step How-To.\” Rocket Mortgage, 6 Aug 2020, https://www.rocketmortgage.com/learn/how-to-buy-a-house.