While buying your first home is an important milestone, it is also a challenging endeavor that can prove to be quite overwhelming. Not only do you have to shop around for the perfect structure for you and your family, but you will also need to obtain funding through the means of a mortgage in order to make the purchase.
A home is the single largest investment that you will make in your lifetime. As a result of this fact, it is imperative that you take a few essential steps to help you through the process. In this brief guide, you will be introduced to 4 of these.
Step #1: Saving for the Purchase
As you likely already know, lenders will require a down payment on the home that you elect to purchase. You should start saving money prior to even shopping for your home.
This is best done by automating the process.
In other words, you should have a certain percentage of your income direct deposited into a special savings account. You should avoid spending any money out of that account for anything else other than your home.
In addition to saving for the down payment, you should save for the closing costs associated with the purchase of the home.
While saving your money, look into programs that are designed to help with down payments and associated expenses. This could help you get ahead on your first payment when it comes due.
Step #2: Ensure You Have a High Credit Score
The next step to preparing for the purchase of your home is to get your credit score as high as you are able to.
Getting approved for a loan will be heavily dependent on your score.
To increase the score, make sure you make all payments on any credit cards, loans, and utilities on time, avoid maxing out credit resources, pay off accounts and keep them open to ensure that you have a longer length on your credit accounts, and make use of various types of credit accounts.
By taking these steps, you can quickly boost your credit score.
Step #3: Gather Important Documents
When preparing to apply for a home loan, there are many documents that you should gather. These include pay stubs, tax returns, your bank statements (approximately six to twelve months’ worth), and other types of financial information.
Step #4: Determine What You Can Afford
When seeking a home loan, you should determine just how much you can afford to spend.
Simply start by figuring out your debt-to-income ratio; that is, the amount of your income that is spent on debt payments each month, prior to any type of deduction.
It is best to avoid exceeding 40% of the gross income that you make each month.
We Can Help
Are you ready to purchase a home? Do you need a home loan? Would you like a little help with the process?
If you answered “yes” to any of these questions, contact us here at Somerville Bank for assistance by visiting one of our many locations: https://somervillebank.net/locations/