5 Financial ToDos For FirstTime Buyers

Dated: 09/01/2017

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First-time home shoppers are eager to buy, but there’s a lot you need to do before you start touring listings and submitting offers. Make sure you keep on track so that the path to closing is smooth. Here are a few items you can remind you to do to make sure your finances are in order.



1. Determine total monthly housing budget. 

What can you really afford? The total should include estimated taxes and home insurance costs, too. After all, in some places, that can double your mortgage payment. Buyers should be encouraged to talk to an insurance agent to get an estimate of the costs in the areas in which they’re looking to buy. Mortgage financing giant Fannie Mae recommends home buyers spend no more than 28 percent of their income on housing. Buyers may start to struggle financially when housing costs take 30 percent or more of their income, financial experts warn.


2. Factor in the closing costs. 

Buyers shouldn’t be blindsided by the cost of a transaction. Be sure you know everything from origination fees, title and settlement fees, taxes, and prepaid items (such as homeowners insurance or homeowners association fees). You'll get more precise numbers from their lenders as they get through the paperwork, but a general estimate will help you ensure you’re shopping within your budget from the onset.


3. Examine creditworthiness. 

Will you even be able to qualify for a loan? Buyers should get a free annual credit report and look for any errors or unresolved issues. You should contact the credit reporting bureau immediately if they spot any errors. You also might want to determine your FICO credit score, which many lenders use to help determine an interest rate for financing.


4. Prepare documents. 

Buyers will need to be ready to show a lot of documents when applying for a home loan. These include pay stubs, bank account statements, W-2s, tax returns for the past two years, statements from current loan and credit lines and names and addresses of landlords for the past two years. Gathering these together ahead of time will help make the process smoother and faster.


5. Get preapproved. 

This not only helps you get a better understanding of what you can truly afford, but it also puts you in a better position to submit an offer when you find a home you love. Also, financial planners say applying to multiple lenders in the same month may help boost a buyer’s chances of getting a loan approved at the best rate possible without dinging their credit score too much. 


Source: "11 Must-do's for the First-Time Homebuyer," Las Vegas Review-Journal (Aug. 7, 2017)

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