First Time Home Buyer Tips

After hard work and thoughtful consideration, you are ready to take that leap into home ownership. Purchasing a home is a big commitment, and while it can be thrilling, it can also be a bit intimidating. To help get you through the process of getting a mortgage, here are a few tips that will get you prepared and organized, and in your new home quicker.

Check Your Credit

A borrower’s credit score is one of the primary factors used to not only determine home loan eligibility, but the interest rate you’ll be paying on that loan. Request a credit report from each of the three major credit reporting agencies – Transunion, Equifax, and Experian. You are entitled to one free report from each agency every 12 months. You can easily order these from AnnualCreditReport.com.

Go through each report and look for mistakes, unpaid accounts, or collection accounts. If mistakes or other adverse information are contained in your report, you can dispute them or clear them up by paying them off.

Qualify Yourself First

The standard rule that most mortgage lenders go by when looking at your debt-to-income ratio is that no more than 28% of your pre-tax income be used for your monthly housing payment (which includes the principal payment, interest, taxes, and insurance). This figure is referred to as the “housing ratio” or “front-end ratio”. Lenders prefer that the “back-end ratio”, that portion of your income that includes all monthly debt obligations, be less than 36%.

Organize Your Documents

Your mortgage lender requires a bit of financial information from you to get you qualified. Knowing what you need and where to find it can save time when going through the lending process.

Typically, lenders require the following documents:
• W-2 forms for the previous two years, if you collect a paycheck
• Current profit and loss statement or 1099 forms for two years, if self-employed
• Two most recent paycheck stubs
• Last two federal tax returns
• A complete list of debts with monthly payments and current account balances
• A list of assets (to include two months of your most current bank statements and investment statements, real estate and vehicle titles, and statements and records of other assets)

With a little financial homework and an understanding of what lenders use and look for to qualify you for a mortgage, and how much you qualify for, you’ll be better prepared for the process of what to expect when you start your first home buying journey.

For more information on the mortgage process and the types of mortgages available, please contact Integrity Mortgage & Financial Inc. by phone or email at (719) 638-0531 or info@integritymtg.com.