Buying your first home is an exciting process, but the financing and associated paperwork can be daunting. To make the experience less stressful, assuming that financing is necessary in order to make your first home purchase, what may be particularly helpful is to learn the technicalities.
As a first-time home buyer–prior to reaching out to a broker or looking for properties–start thinking about how much you and your family are comfortable with making. This calculation can help narrow down possible neighborhoods. Next, choose a broker familiar with those areas. As you are looking, it is good to ask your selected broker about taxes and homeowner's association dues so that you have a more accurate “all in” cost of owning.
After finding a few properties that fit your desired neighborhood and budget, you may expect a down payment of 20 percent or more to help avoid the cost of mortgage insurance. That being said, as a first-time home buyer, there are many loan programs that are available if you have less than a 20 percent down payment or none to put down. Some loan programs to note are USDA, VA, FHA, as well as conventional loans.
Typically, there are loans corresponding to your specific financial needs, but be careful not to exceed a monthly payment that stretches you financially. Financing takes a sufficient amount of time before it can be approved, therefore, patience is required, especially regarding the necessary amount of completed paperwork. A few of the items to be gathered before starting the financing process include:
- Income documentation–W2s, profit and loss statements, pay stubs
- Assets–statements for checking, savings, stocks, bonds, etc.
- Liabilities–If you rent, the contact information of the property management company, if you pay a landlord directly, 12 months of canceled rent checks or statements
- Miscellaneous–driver’s license or passport