The purchase process of a home is one the most important decision one will make in their life. Along with the decision of purchasing the long term commitment that comes along with it. Before you know that excitement of the possibility of having your very own home you have doubt and fear set in. Following are question that will help in determine if you are ready for the journey of home ownership. So with that said here are a few things to consider when buying a new home:
Do I have the fund set aside in my bank for a down payment on a home and closing cost?
- Depending on type of purchase the down payment will vary. (FHA, VA, Conventional, Other) Typically you will need 3.5% plus an additional 4.5%, of the purchase price of home, to be in your bank account for lenders to see.
What monthly payment can I afford?
- Need to know your debt to income ratio. Which can be determine with calculating all your income minus your debt.
How much cash do I need at closing?
- On first time buyer or single home-owners it approximately 3.5-4% and on investment properties anywhere from 10-25%.
Do I have everything I need in order to get approved for a home loan?
Items that you will need for your loan application include:
- W-2s and/or tax returns from the past 2 years.
- Proof of gross monthly income for the past 30 days.
- Proof of investment income, including rental incomes.
- A list of creditors, including account numbers, balances, and monthly payments.
- Most recent 30 days of pay stubs.
- Past most recent signed personal tax returns—all pages and all schedules
- If self employed, 1099′s and complete business returns, YTD P&L , business license and/ or DBA, copy of 3rd party verification such as an advertisement of your business.
- Social Security/Disability/Retirement Income Awards letters and proof it will continue for 3 years.
- Rental property-current leases, insurance, mortgage and tax statements for each property.
- Bank Statements: Most recent 2 months of statements, all pages for all accounts. Internet statements are acceptable if they contain your name, banks’ name, account numbers.
- Please source all deposits that are not regular pay checks. Sourcing should include a copy of the check deposited.
- Provide all pages of the most recent statement (s) for 401k, retirement, IRA’s, CD’s etc.
- Letter of explanation for any job gaps, decrease in income etc.
- If you are receiving child support/alimony, please provide proof of receipt for the most recent 12 months and the most recent support order.
- If you are paying child support/alimony, please provide a copy of the court order and payment plan.
- Mortgage, insurance and tax statements for any additional property owned.
- Driver license(s) & social security card(s).
- Copy of the DD214 Member page 4 or if active duty, statement of service.
- Original Certificate of Eligibility.
- Name, address & phone number of nearest relative not living with you.
Additional Information that might be needed:
- Name, address and phone number of your landlord.
- Divorce Decree—all pages.
- Complete copy of all bankruptcy papers including final discharge.
- Provide copy of earnest money check clearing the bank.
- If selling current home, need documentation of listing and contract.
- If current home has just been sold, then a copy of the HUD 1 statement and proof of receipt of proceeds.
- If receiving gift funds, need a completed gift letter and donor sourcing for gift funds (this is a complete copy of the donor’s bank statement showing the money coming out for the gift. Donor will also have to source any large deposits). We will also will need proof of deposit to borrower’s account (copy of check and statement with deposit on it) or if cashiers check made payable to title, we will need a copy of the cashier’s check.
- Name and phone number of your insurance agent for the subject property.
- Letter of explanation for all credit inquiries—must be specific for each inquiry and each result.
- Letter of explanation on any negative credit.
What am I looking for in a home?
- Number of Bedrooms
- Number of Bathrooms
- Lot size
- Neighborhood or subdivision
- School districts
- Proximity to work
- Proximity to shopping, restaurants, hospitals
- Pools, entertainment areas, etc.
Once I find a home to purchase, what do I need to do next?
- Need to determine if property will appraise at negotiated price for lending purposes
- Have Pre-Approved Loan before going into binding contract for purchase
- Locate title company whom will run title search and make sure that no clouds on title or many other problems or that there is no judgement, mechanical, tax or any other liens that might be attached to property
- Hire inspectors to go through home, survivors to make sure all easement, encroachments, and any other property details are brought about along with restrictions that are attached to property
What objectives should I keep in mind when visiting a home?
- Keep a list of the features that you need and want in a home
- Once you have your list; stick to your list and don’t allow yourself to deviate away from your needs and goals.
- Review your list with your agent and go over the pros and cons of each home; this will help you stay on track while still keeping your eyes out for a great property.
Should I work with a REALTOR®?
As in any relationship whether personal or business you must be able to relate to each other; as in any good partnership to make it work. So you may be asking yourself these questions:
- Is this agent able to understand my needs?
- Is the agent able to help and guide me to achieve my goal with this process?
- Does this agent have the personal and professional experience that best relate to my current situation and be able to assist me with the best advise?
- Does this agent has the ability to assist me in viewing what is around my prospective areas and put me in the best financial position?
- Guidance with the negotiations of purchase, setting up inspections and coordination of title company.
- Can refer you to preferred lenders to insure easy flow of lending process and best mortgage rates.
- Research property listings for potential matches to your criteria and schedule showings for you at a convenient time.
- They go through extensive training, carry much experience and has an oath to providean ethical and moral duty to their client to look into they best interest. Remember, there are no out-of-pocket fees that you pay to the buyer’s agent. These costs are incurred by the seller. Select a REALTOR® that you trust and with whom you feel comfortable working.
If you choose to use an agent, make sure you enter into a Buyer’s Agency Agreement. This ensures that the agent will represent you, as the buyer, in your purchasing process, and not represent the interests of the sellers.