You’ve decided to take the big plunge and buy your first home. You have so many questions about how its done. You’ve heard the horrror stories about people packed up and ready to move into their new home only to find out at the last minute their mortgage application was denied, or delayed. So the questions start running in your head about the process and what to expect. Well here is a quick run down.
1) Credit: You have to have decent credit to purchase a house, the days of 550 or less are gone. The only way to get good credit is to have loans that you are paying on every month on time. So if you have a school loan, credit cards, auto payment, then make sure you have paid them on time for at least the past several months. Be ready to explain any late payments.
2)Down payment: Banks are requiring a minimum of 5% to even think about purchasing a house. Most loans are now requiring a 20% down. Don’t have it, then you aren’t going to be able to buy that house.
3) Income to Debt: you monthly payments to all your loans, cc’s, and auto should not exceed 1/3 of your gross income. So if you are making 5K a month then you shouldn’t have monthly debt payments that total more than 1666 a month. If its high you are going to be out of luck.
If all of these items are a green light then it is time to apply for a mortgage. Most mortgage companies now require a non refundable good faith deposit around $400-$500, just to get the process going. They will pull your credit and will need this list of items:
- 3 months of bank account statements
- copy of drivers license/ social security
- possibly tax returns
Once you have gotten all this to them expect the underwriter to request more information on you. They want to make sure you are who you say you are. If all goes according to plan in roughly 30 days you will go to closing at a title company where you will spend an hour signing dozens of documents. Then you will get the keys to your new home.