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Planning to buy a home in the near future?
The sooner you get your money situation in shape, the easier it'll be
to take on a mortgage loan. Here's how you can prepare your credit and finances for a future home purchase.
Your dream home awaits, a sanctuary bathed in sunshine and laughter. But before you start packing your imagination, let's talk numbers in a way that won't send you running for the hills.
Think of affordability like baking a delicious cake: you need the right ingredients! Here's what goes in:
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Income: How much dough do you bring in each month?
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Credit Score: Think of it as the secret leavening agent, making everything rise smoothly.
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Debt-to-Income Ratio: This fancy term basically means how much of your income goes towards other debts (don't worry, we'll help you crunch the numbers!).
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Down Payment: Like the delicious frosting, this sweetens the deal for lenders.
Generally, experts recommend spending no more than 28% of your monthly income on your new home (housing payments, insurance, taxes – the whole shebang). But hey, if you're a veteran hero, that number jumps to 45%!
Feeling a little overwhelmed?
No sweat! We have three options to make things easy-peasy:
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DIY Dream Budget: Use our handy online calculator to estimate your monthly payments and get a ballpark figure for your perfect home price. Numbers whizzes, rejoice!
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See the Market: Dive into our home search page for a detailed look at what's out there. Seeing exactly how much homes cost will help you determine your comfortable price range. Plus, this helps manage expectations!
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Let's Chat! Feeling more like a "leave it to the experts" kind of person? No problem! One of our friendly agents is just a text away, ready to connect you with a reputable lender who will guide you through the process with a smile. The lender can also pre-qualify you for a loan, putting you in a strong position when you find your dream home.
Don't worry if your dream home seems farther away than the dark side of the moon.
Consider taking a few detours instead:
Let's start stashing away a couple of bucks here and there. Every dollar you squirrel away brings you one step closer to your dream home's warm embrace, where you can finally stop using your oven as a massive storage unit. Lenders like to see something in your account besides lint and loose change, but it's not a deal killer if you don't have much yet. Just show them your robust collection of Beanie Babies as collateral...Ok, Not really. But, check out our Financing page for more creative solutions!
Explore those quaint side streets for a perfectly-sized love shack that won't break the bank and leave you eating ramen for eternity. Remember, we now live in a day and time where micro-houses are a legitimate thing! Who needs square footage when you can be uber-efficient by showering, cooking, and sleeping all in the same tiny space?
Broaden your search horizons wider than an elephant's backside! Unearth hidden gems in neighborhoods you can't even pronounce - vibrant communities with delightful surprises at prices so friendly, you'll want to take them home to meet your parents. Imagine finding an entire treasure trove of possibilities tucked away like a pirate's bounty! In short, be flexible enough to do a split while house hunting.
Hold the champagne (and shopping sprees)! Dream home in sight? Awesome! But before you go hog wild with new credit lines, take a deep breath and listen up...
Think of your credit score as your key to unlocking your dream home. Every new credit line or purchase you make in the next 5 months can ding your score by as much as 10% - ouch! That could mean the difference between "welcome home!" and "sorry, not this time."
The excitement's real, we get it. But trust us, charging new furniture or that fancy car right now is a BIG no-no. Even if your dream home is "under contract," high debt before closing can still disqualify your loan.
So, here's the plan:
Hold off on any major purchases (cash only, please!), even if that car loan seems tempting. Remember, car loans are stricter than mortgage standards, so don't risk it!
Especially for those with lower credit limits, even a small purchase can have a big impact. Be credit card Zen until your loan closes, then celebrate with all the bells and whistles (and new furniture!) you deserve.
Documents needed for a home loan
So, you've decided to buy a house. Congratulations! Now, get ready to embark on a thrilling scavenger hunt for your financial life story. But before you do, I want you to read this article from Forbes magazine which talks about The Perfect Loan File. This should be required reading for anyone buying a home. More specifically, it goes into why the lenders ask for so many #&*@^%! documents just to get a home loan.
Your lender, "bless their cautious hearts", will need more documentation than the Smithsonian to verify you're not a financial black hole disguised in a human suit. Don't worry, though, this isn't some elaborate hazing ritual. They just want to be sure you won't vanish into thin air, house and all, after they give you the money.
Here's what you can expect in your document dossier:
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1. Pay Stubs: Prove you're a money-making machine! 30 days of pay stubs are your golden tickets. Feeling paperless? Ask your HR buddy for digital versions.
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2. Job Proof: Did you really score that unicorn job? The lender might ask for a confirmation letter from your boss – just to be sure you're not a cat in disguise.
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3. Employment History: Think of it as your work-iversary scrapbook. Gather contact info for the past two jobs, so the lender can stalk... er, verify your employment history.
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4. Tax Time Machine: Dust off your last two tax returns – they're like financial time capsules. Haven't filed for the latest year? Dont have them? Ask the IRS for a transcript. The lender might politely (or not so politely) ask you to get crackin'.
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5. Bank Statements: Show off your budgeting skills (or at least convince the lender you can handle a mortgage) with 3 months of bank statements. Remember, honesty is the best policy (even if it means explaining that "mystery pizza purchase").
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6. Self-Employed Superheroes: Got your own business? The lender wants to see tax returns (signed, with a superhero flourish) and profit/loss statements – basically, proof you're not just playing pretend CEO.
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7. Debt Detectives: Time to face your financial frenemies – car loans, student debt, credit card dragons. Gather statements with balances and contact info – knowledge is power!
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8. Home Hoppin': List your addresses for the past two years, along with landlord contact info (if applicable). Bonus points for a map with arrows showing your epic moving journey.
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9. Extra Income Express: Do you have secret superpowers that generate income? Social Security, pensions, side hustles – spill the beans (on paper, of course). Child support/alimony? Discuss with your loan officer – transparency is key!
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10. Investment Island: Show off your wealth (and potential down payment) with statements for stocks, bonds, savings accounts – basically, your financial treasure chest.
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11. Earnest Money Enigma: So you made an offer and put down earnest money? Prove it wasn't leprechaun gold! Show the source of the funds (bank statement, gift letter from Granny). Remember, honesty is still the best policy, even when dealing with magical creatures.
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12. Dust off that old uniform: Veterans - Get your DD-214, then Certificate of Eligibility (VA Form 26-1880)
There will be other documents they ask of you, but these are the most important. If you are able to secure these, you are half way there!!!
Pro Tip: Keep copies of EVERYTHING in a digital vault (cloud storage, thumb drive, your trusty filing cabinet – you choose!). Lenders love documentation, and having it handy makes things smoother than a freshly paved road. ️
Remember, we're your mortgage cheerleaders, ready to help you conquer this step with ease. So grab your documents, put on your victory dance shoes, and get ready to celebrate in your new home – it's closer than you think!
BONUS TIP - Wanna see if you qualify for a first time homebuyer program? Check here : https://apps.floridahousing.org/StandAlone/FTHBWizard