Top Ten Do's and Don'ts While Buying a Home As a First Time Homebuyer
By: Michael Foote
I recently attended a seminar in which a startling statistic was thrown out. 47% of the previous months residential sales were by first time homebuyers. As a banker this is an important statistic. I need to make sure that segment of the buyers is served to the best of my ability. To that end, I want to share some of the mistakes I've seen during my 22 year mortgage career made by borrowers/buyers.
#10 - Do not change jobs
The purchase process is daunting enough as it is, but to compound things and get a new job during the process may just jeopardize your prospects for an easy loan approval. Hey, I am not saying you can't take a great opportunity I am just saying it can cause issues.
Here are two examples. You have a nice W-2 job paying $75000 a year and you decide the company net door has a job similar with a smaller base salary but offers additional commission and bonus structure that you will likely earn more in the long run. Well an underwriter does not know if the job will work or not and cannot forecast earnings for you. She would likely be required to qualify you on only the base salary as there is no history of the commission or bonus income.
In another example you are a CFO for a plastics company and are hired away by another firm in another industry. Provided base salary and compensation are guaranteed there would likely be no underwriting concerns.
The best solution is to delay any job change until after your financing is complete.
#9 - Do always file tax returns and keep copies
You'd think it would go without saying but many out there still don't file tax returns regularly. Taxes are due in April and if you delay filing you must have filed an extension prior to applying for a loan.
Delinquent tax filings will always complicate and almost eliminate any form of reasonable financing out there. So if you are going to buy a house, you need to have filed your tax returns and up to date.
#8 - Do keep your monthly mortgage statements and other monthly statements for any and all debits of credits.
I am a big fan of keeping documentation from any financial transaction where my money is involved. Well I probably keep too much, but if you are applying for a home loan, there are a whole host of reasons why you should have six months of bank statements, bills accounts statements etc. You should also have at least 3 years tax returns on hand. In the mortgage business we often need support, proof, and documentation to prove many things in a borrower's financial picture. Having these documents handy will save you time and frustration if you have them out and available earlier.
#7 - Don't co-sign for anyone
It is certainly possible you have the wherewithal to co-sign for another person or family member. I cannot share with you how many times I've seen this ruin someone's credit scores. If at all possible avoid doing this ever. If you sign for someone else be prepared to have to qualify with those additional payments as if they were your own debts.
#6 - Don't move money around in accounts
When you are buying a home, you are telling the bank that you are credit worthy, you have been able to properly save the money required for the down payment and closing costs and in some cases you have the reserves to show additional strength.
It is very hard to prove that you have saved properly and have "seasoned funds" if you have recently transferred or had amounts of money transferred between your own accounts and the accounts of others.
Your money should be sourced properly and seasoned appropriately or else additional time consuming conditions will be added to your application.
If you absolutely have to move money - keep every receipt small and large and the statements both with drawls and deposits.
#5- Research your monthly payments options
There is no substitution for experience when it comes to mortgage banking. I pride myself and a very good and very educated mortgage professional. In todays mortgage market it is more important than ever to be technically proficient in all forms of conventional, portfolio and government lending.
Once you do find you mortgage professional you need to consider your payment obligations versus the home and sales prices that will come with them.
While we in lending qualify using your gross wages you are paying with your net income every month. Even though you may qualify for a mortgage does not mean it makes financial sense. It is always important to heavily weigh financing and the tools available for down payment assistance and lower start rates.
#4- Do the math
Know what you are getting into. Read your disclosures we send them to you for a reason. Know what your mortgage terms are, how must it all costs, what your payments are.
#3-Do choose a bank or verified direct lender
Although I have been a mortgage broker in my career I have to say that dealing with a direct lender and/or bank is today the best way to go. The shear truth is these institutions are better able to adapt to the ever changing lending atmosphere. That is not to say there are not good brokers, you just don't have time to figure out who is good or not.
#2-Do make sure you are ready for the commitment of ownership
Let's face it, you are thinking about settling into a home, investment, and an anchor. Houses are a look like pets. You can't just leave them. You have made a commitment. Are you thinking about moving to China for that job or back to Kansas, to be with Dad? If you are contemplating these things...it's not time to buy.
#1- Do Relax
If you are lucky enough to find the right mortgage lender he or she will instill the confidence that will help get through the emotional rollercoaster of buying a home. It is the biggest financial transaction you will be part of and undoubtedly that strike fear in many. I am here to tell you it's all going to be OK. If it is meant to be it will be. If you've done what I've said above you'll be fine.
And congratulations on your new home!
With over twenty years experience in mortgage lending, a Certified Mortgage Banker Designate (CMB) from the Mortgage Bankers Association of America, and billions in funded loan experience, I can assist you and/or your clients with the most important financial decisions realted to your residential and commercial real estate. Please call or email me today
Michael A. Foote, CMB
Certified Mortgage Banker
949.584.4600 begin_of_the_skype_highlighting 949.584.4600 end_of_the_skype_highlighting
michael@michaelfoote.com
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