Buying your first home is full of excitement. You can probably already envision enjoying sunny days in your Southern California backyard and the changes you’ll make to turn the house into your home.
But before you can start packing, you’ll need to figure out a way to pay for that home.
As a first-time buyer, it’s in your best interest to find as much trustworthy help as possible when shopping for a home. This will likely be the most significant purchase you’ve ever made, and there are plenty of ways in which it can go wrong.
Start taking some of these steps even before you look at your first listing and you’ll be able to get a loan as a first-time buyer.
Step 1: Get Your Credit Report
Lenders want to see that you’re trustworthy and will repay your mortgage debt, so they’ll look for evidence of this in your credit report. If your credit score is low or you have a poor history of repayment or default, your rates and terms may be higher, if lenders will issue a loan to you at all.
Step 2: Get Pre-Approved
A pre-approval from a mortgage lender will be your ticket to proving to sellers that you have the means to pay for the house. Plus, a mortgage pre-approval will help you figure out just how much money you really have to spend. For this part of the process, you’ll likely need:
Paystubs or W2s
Tax returns for the last two years
Bank statements for at least three months
Proof of funds for your down payment
Step 3: Figure Out Loan Options
As a first-time buyer, there are programs and loan types available to help out people just like you. FHA loans are designed to help you qualify for a mortgage, even if your credit is less-than-stellar. With a decent score, you may be eligible for a 3.5% downpayment instead of the traditional 10-20% required with conventional loans.
If you are a veteran, a VA loan comes with no down payment and is even more lenient with credit score requirements.
Step 4: Gather Your Down Payment
Where are your down payment funds coming from? If they are in savings, make sure you are keeping them somewhere separate and secure from other money. If you are receiving gift money from family or close friends, you’ll need to have a letter from each that states the money is not a loan to be repaid.
Step 5: Start Shopping
Once you know you can get a mortgage and you know the amount you qualify for, it’s time to find an experienced real estate agent to help you through the rest of the process. Find someone with a history in your area who will know local lenders and who will work with your best interest in mind.