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The ABC’s of Home LoansHow hard/easy is it to buy a house? Where do I start? |
| A. Have a job that holds out
taxes (W-2) for two years. 1. If 1099’d (self employed) you can only use what you paid taxes on to qualify, and need 2 years tax returns 2. If you just graduated college and obtain a job in your field of study, no waiting period normally. B. Have a credit history of at least two years on one or two accounts. 1. Have a car loan, an installment loan, and a credit card, pay these on time, keeping your cc balance below 30% of available limit. 2. Do not have any collections, judgments, or liens, or past-due child support payments. Doing these things should generate a score of over 620. C. Have 3.5% of your purchase price for your down payment. Example: on a $100K purchase, have at least $3500. You should be able to negotiate your contract so that the sellers pay for your closing costs and escrow. What are acceptable ways to get the money? 1. Save it 2. Get a gift from a family member, who has to sign a gift letter and show source of gift funds. 3. Borrow against a secured asset, such as a vehicle…the payment will be included in your debt ratio, check with loan officer first. Now that I know what to do, what documents do I need to gather? * Your last two tax returns. * Your paycheck stubs for the past 30 days. * Your bank statements for the last 3 months. * A copy of your driver’s license and social security card. If ever divorced or had bankruptcy, must have decree or court papers. D. Don't let small bills go unpaid, they will end up as collections. If you can pay them off at once, that is best, but if they are too large then you may be able to set up a payment plan with the creditor. Pay them on time for at least 6 months, then apply for your home loan. E. Embrace the idea of saving money, even if small amounts. Underwriters (the ones that approve your loan) love to see this, and you end up with money! F. Forget about incurring any new debt, and it's best if you get your credit cards paid down to below 30% of your available limit. G. Give Freedom a Ring for any questions you may have (trust us, you will have questions!) H. Help yourself get ready for that new payment. If your prospective new house payment will be $200 more than you now pay for rent, save that amount each month to make sure you can afford the new payment. I. Include the whole family in the process. Challenge your spouse or kids to find ways to save money. Let it become a game! J. Just to be safe, don't allow your credit to be checked after you have started the loan process. It could lower your score. K. Keep all of your paycheck stubs and bank statements handy until the loan has closed. Don't pack up all of your financial information until after closing. L. Lock your interest rate in as soon as possible. A bird in hand.......you know the saying. |
