How to become a well-qualified buyer
In a competitive real estate market, it's tough for even extraordinarily well-qualified buyers. You need to stand out in a crowd and be well-qualified. How do you do that? Start the home-buying process early. Becoming familiar with the process can prepare you for the move ahead and make you a buyer to whom people want to lend and sell. Here are some pointers to get you ready before you buy:
Check your credit 6-12 months before applying for a loan: pull your credit reports from each of the three reporting bureaus (Experian, TransUnion, and Equifax). Why do you want to check itt this far in advance? It gives you room to improve if needed (pay off credit card debt, car loans, etc.). A score between 580 and 620 is the minimum, and of course the higher the score, the better.
Figure out your debt-to-income ratio. Your DTI is the percent of your monthly gross income that goes toward debt repayment. Lenders use this to assess affordability. 36%-43% is the maximum.
Figure out your budget. There are a number of online mortgage calculators you can use to determine this.
Save for your down payment. The larger your down payment, the less you'll need to borrow. 3% to 5% is the general minimum range, but it depends on your goals and your type of loan.
Research loan programs. There are many options out there and you'll want to choose a loan based on your goals. Your goal could be to find a low monthly payment, a low down payment, or find a loan that takes a short time to pay off.
Get a pre-approval letter from your lender. You'll submit a loan application along with your financial statements, tax returns, paystubs, W2s, and a credit check.
You'll also need proof of funds to close. A proof of funds letter is a completely separate document from your pre-approval that shows where you’re keeping the money you need to bring to the closing table. Your financial institution can help you with this.
Please do not make any large purchases before closing, like a new car. An auto loan will affect your debt-to-income ratio and make you look like a riskier borrower. The same goes for getting new credit cards. Lenders might be less likely to approve you for your home loan. Also, try not to quit or change jobs.
Now you're ready to come see us. Don't worry if you don't have every duck in a row--we're here for you.
In order for us to help you without possible conflicts of interest, protect your confidentiality, and operate in your best interests, we will ask you to sign a buyer’s agent agreement before we start showing you homes.
We will go over your finances and research, and discuss your must-haves and deal-breakers in a home.
Put our knowledge and experience to work for you. We love matching people with their dream homes and we will work with you every step of the way.