Buying a home can be a very rewarding and enjoyable experience, when you are properly prepared. Being prepared means knowing what you want and can afford. In order to have everything work to your advantage you must have knowledge of your financial situation and be prepared to back it up with credible records. The benefits of preparing to buy a home far out weigh what a person experiences when they are not prepared. Being unprepared means that someone else is in charge of your choices. This may mean that they’ll be working to their best advantage and not yours.
Choosing a home to buy doesn’t mean an instant mortgage approval. Mortgage approvals are based on the ability and willingness to pay the mortgage according to the terms of the mortgage company. It is wiser to get prequalified by a mortgage lender first. This way you are in control. The prequalifcation letter that you get from a mortgage company or bank says you qualify to borrow a certain amount of money. With this prequalification letter the process of buying a home becomes as easy as finding the home and making an offer. The typical stress of getting a mortgage is removed ahead of time, leaving a situation where the focus is solely on finding the home you can afford.
The steps to getting a quality prequalification letter take time and discipline. It requires keeping good records and putting your financial situation on paper. Whether you find a home first or not mortgage approval is a must if you need to finance your home. It is much better to have a mortgage approval before you choose the home you want to buy than it is after. Once you received approval for a mortgage you have the advantage.
The first step is to get a copy of your credit report. Contacting one of the credit reporting agencies can do this. Knowing your credit status is vital in your preparation to purchase a home. Once the credit report is received, you should:
1. Review the report to make sure the information is correct
2. Report incorrect information to the credit agency
3. Bring late payments and past due accounts current.
4. The next step is to get your tax return and W-2’s for the last two (2) years, bank statements for the last three (3) months, twelve (12) cancelled rent/mortgage checks and one (1) month of recent pay stubs. This information will give the mortgage lender a snapshot of your present financial situation and enable the lender to give you a prequalification letter. If there are problems, the lender will be able to tell you what you can do to qualify in the near future.
Start preparing now to purchase that home. Get your credit report and other financial information together. Set up a savings plan to help set aside the funds necessary to purchase your home. Remember, buying a home should be a rewarding experience. Managing your finances wisely and keeping good records will pay off in time. When you plan and prepare, the home of your dreams is bound to be yours.