5 Steps to Prepare for a New Home Purchase

Buying a home can be fun and exciting but can also come with some stress if you are not properly prepared. Here are five steps to best prepare yourself for buying your new home!

1. Start saving for your down payment as soon as possible.Down payment requirements for buying a home can vary depending on the type of property you are buying and your credit history. While a traditional down payment can come in the form of 20%, there are products that can require as little as 3.5% to 5% down. For a $200,000 home you could need anywhere from $7,000 to $10,000 respectively. The earlier in the process you start saving, the better! You can make buying a home much less stressful if you have planned ahead and saved plenty of funds, try stashing money into a high yield savings account to give you a boost as you save!
2. Limit your expenses.
   When buying a home, your finances are going to be looked at very carefully. You want to have at least three established lines of credit reporting toward your credit history (credit cards, student loans, auto loans, etc.) for the past 12 months. That being said, it is wise to avoid adding unnecessary debt or making any large purchases while planning to buy your new home. Your goal is to buy a home, not to save an extra 15% off the new pair of shoes you bought by opening that new store credit card, or to buy that new car that you’ve been eyeing!
3. Understand your credit history.Knowing what is currently reporting to your credit is very important. Check your report for any inaccuracies or delinquent information. If you have accounts past due, then work on catching them up to get your credit back in good standing. While preparing to purchase your new home, make sure to avoid making any late payments, especially any payments for your current housing. If you are currently renting you will likely need to be able to prove that you have made your rent payments consistently on time for the past 12 months, as a late rent payment can be viewed as a late mortgage payment and may be detrimental to qualifying for a new home loan.
4. Gather your financial documents.
   Having all the required financial documents gathered up and easy to access will make your home buying process much easier. Make sure you have your most recent two years of tax returns, and W2’s/1099’s available as well as your most current paystubs, and bank statements. Having these documents in a digital format will make things much easier on yourself when you need to forward them to your lender to process your loan application.
5. Get prequalified.
   Before shopping for your new home and placing any offers, make sure to get prequalified for a mortgage loan. Speak with a mortgage loan expert about your current financial situation to get started. Being prequalified will take the guesswork out of how much of a loan you can afford and what mortgage products will best suit your needs.

Written by: Casey Sullivan, Team Leader at Royal United Mortgage LLC

Published: July 28th 2015