5 financial to-dos for first-time homebuyers
LAS VEGAS – March 26, 2018 – First-time home shoppers walk through a broker’s front door eager to buy, but there’s a lot they need to do before they start touring listings and submitting offers. To keep buyers on track, real estate agents should suggest the following steps before they begin:
Determine total monthly housing budget
What can your clients really afford? The total should include estimated taxes and home insurance costs – in some places, that can double their mortgage payment. Encourage buyers to talk to an insurance agent for a cost estimate in the areas where they want to buy. Mortgage financing giant Fannie Mae recommends home buyers spend no more than 28 percent of their income on housing because homeowners can start to struggle financially when housing costs take 30 percent or more of their income, financial experts warn.
Factor in closing costs
Buyers shouldn’t be blindsided by a transaction’s cost. Agents should explain everything from origination fees, title and settlement fees and taxes, to prepaid items, such as homeowners insurance or homeowners association fees. They’ll get more precise numbers from their lenders as they get through the paperwork, but a general estimate will help new buyers ensure they’re shopping within their budget from the onset.
Will your client even be able to qualify for a loan? Buyers should get a free annual credit report and look for any errors or unresolved issues, and contact the credit reporting bureau immediately if they spot any errors. They also might want to determine their FICO credit score, which many lenders use to help determine an interest rate for financing.
Buyers will need to show a lot of documents when applying for a home loan. These include pay stubs, bank account statements, W-2s, tax returns for the past two years, statements from current loan and credit lines and names and addresses of landlords for the past two years. Gathering these together ahead of time will help make the process smoother and faster.
This not only helps buyers get a better understanding of what they can truly afford, but it also puts them in a better position to submit an offer when they find a home they love. Also, financial planners say applying to multiple lenders in the same month may help boost a buyer’s chances of getting a loan approved at the best rate possible without dinging their credit score too much.
Source: “11 Must-do’s for the First-Time Homebuyer,” Las Vegas Review-Journal (Aug. 7, 2017)
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