Before we begin, know that I am always available for questions when they arise. Call or text me at any time – 732-930-4290 or reach out on Facebook @MarkGrimesRealtor.
There is a good chance you are like many first time home buyers and not knowing where to begin or how to prepare for your first mortgage is common. Buying a home is one of the largest purchases you will make in your life, but it doesn’t have to be difficult. The home buying experience can be confusing without the right guidance and expertise on your side which is where choosing a Realtor® who will work tirelessly with dedication and professionalism is important. When I decided to write an article that highlights the important factors from credit information to choosing a lender and even the down payment, I thought it would best be written on a page that can be continuously updated to include the most relevant and current information. An article is more of a static bunch of information meant to explain one topic – but there are so many topics to cover, it is just best to create a starting point and build on that.
Key Topics When Considering Borrowing
- Keep credit card balance usage at or below 30%.
- Pay bills on time! Late payments are a red flag to lenders.
- Perform “soft pulls” and monitor your credit regularly to check for errors and irregularities.
- DON’T make any large purchases using credit (cars, boats, luxury items) just before applying for a home loan or during the process.
- DON’T open many credit cards in a short period of time, especially in the 12 months leading up to the loan application.
- DON’T make large cash deposits other than your paycheck during 6 months before applying for a loan or during the application process.
- Financial “gifts” from family members that will be used towards a down payment must be explained. Be prepared to answer the questions from your lender.
Manage Your Credit
More often than not, many people don’t understand how important it is to keep a good handle on your credit. After the housing “crisis” in 2008, lenders are now looking at how you manage finances in a whole new way. Gone are the days of obtaining financing by virtue of just having a job. Now you must work on your credit continuously, like maintaining your car – one slip-up could cost you dearly down the road.
If you are currently thinking about moving out of the family home or upgrading from a rental, it is critical to know that having balanced credit with a low debt-to-income ratio. When you are ready to start your home search, especially in the type of real estate market that we are currently in, knowing how to manage your credit at least 12 months prior to speaking with a lender is vital. To have a basic understanding of what your credit report looks like, it is important to run what is called “soft pulls” of your credit to know where you stand for starters. A soft pull does not adversely affect your credit because it is being done by you, which can be performed through a number of free online services such as Credit Karma or even the the credit bureaus (Experian, TransUnion, and Equifax). However, it is important to understand that what you see on a free credit report may not necessarily reflect exactly what a lender will see through a “hard pull”. Nevertheless, it is a good idea to see what is on your report in case there is misinformation or perhaps there is a creditor that is reporting erroneous information. By taking a look at this information in advance it can save you major time and perhaps embarrassment if there are items negatively affecting your credit score that you didn’t even know about. Taking out the unknowns in advance will make the pre-qualification process smooth and without surprises.
It is a good idea to have a balanced credit report which includes different types of borrowing, all of which have payments made on time. Credit cards and car loans will impact your credit differently in the eyes of a lender. If during your credit inquiries you see something out of the ordinary, or your have experienced some financial difficulties in the past that are negatively affecting your credit report, it may be a good idea to contact a credit counselor. Be weary of the many credit “repair” companies. There is no quick fix for bad credit, only time and accountability will fix bad credit. However, if there are things on your report that you fear might prevent you from obtaining a home loan, visit the Mortgage/Financial Resources section of my site. There are a few credit counseling services as well as vetted lenders that would be more than happy to answer any credit related questions you may have. As noted on any page of my site where I am referring a person or service, I have either personally used or I have an on-going relationship with them. Feel free to mention my name, but know that I am not endorsing any one individual or company for compensation.
Letter of Pre-Qualification
When shopping for a home you are going to come across one that you absolutely fall in love with, and now is where I am offering full disclosure. Homes that are priced competitively are going to create a demand when you are not the only prospective home buyer that has an interest in that one particular home. Multiple offers will essentially create a “bid war” and the only way to prove that you are a serious home buyer is to have a letter of pre-qualification ready. Being qualified for a home loan will not only help you when the time comes to quickly submit an offer before your competition, but it will allow you to know how much home you can afford. I am sure you remember the headlines from the 2008 recession period. You certainly do not want to fall victim to buying something that you later regret and find out that you simply cannot make the payments on and balance life’s little surprises.
Remember, this page is going to be updated continuously. Additions are coming and I want to create the ultimate guide for first time home buyers. Please feel free to comment below if there are topics you would like me to cover.
Also, navigate through the page links on the Buy a Home/Building/Land section. From there you can find more information on lender programs, lenders and mortgage calculators. Again, if at any point you have any questions, feel free to give me a call or send me a text at 732-930-4290. You can also reach me through the Contact page.