So you’ve decided the time is right to buy your first home…that much is certain. And we can’t blame you, with mortgage rates this low and a real estate market ripe with opportunity. But now what? Before you even get a pre-approval, before you choose a realtor and start house hunting, consider these things first.
1. Know Your Credit Score
Because there are minimum credit scores to qualify for a mortgage, it’s important to know your credit score. If you’re an Arbor Financial member enjoying the services of IDProtect, one of the benefits is that you have free access to your credit score and credit report at any given time. Otherwise, Federal law entitles everyone to a free copy of their credit report from each of the three credit reporting agencies every 12 months.
If you need help understanding or raising your credit score then contact Arbor Financial today at 269.375.6702 or fill out this form to schedule a free confidential credit review.
Your credit review includes a complimentary credit report and FICO credit score. Together, we will review the accuracy of your report, provide tips to improve your score, and answer any questions. Additionally, we’ll even assess your monthly expenses and provide options to help lower your payments and/or save you money.
2. Know Your Debt
This is a great example of why it’s important to establish good credit history early on. To apply for a mortgage, you will need at least three active trade lines to serve as verifiable payment opportunities. In other words, they show that you have an established history of making payments, and making them on time. Things like an auto loan, student loan, line of credit and retail card all qualify – as long as you’ve been making payments on them in the past 12 months. If you paid off your student loan a couple years ago – that’s great – but it can’t be counted as an active trade line. So what if you don’t have that many sources of credit? Consider taking out a small loan – even just $500 – just to start making monthly payments.
3. Round Up Your Liquid Funds
Liquid funds are a fancy word for cash. It can be from money in savings, CDs and investments, maybe 401(k) savings (unfortunately, it cannot be monetary gifts from parents or other family members). You will need to provide statements that prove you have had those funds for at least 60 days.
3. Gather Up These Papers
This will come in handy down the road when you’re ready to sign the purchase agreement. Without the required set of documents, your loan cannot move forward.
- Most recent two years of W-2s or if you’re self-employed, two years tax returns.
- One month’s worth of pay stubs (two, if you only get paid once a month)
- Any non-Arbor Financial bank statements for the past 60 days
- Two months’ worth of statements from your retirement account(s)
4. Time On Job
Arbor Financial will look for at least two years of work history being in the same industry. Sometimes exceptions can be made, like if you’re a recent college grad and just started your first job, but be prepared to show proof that you’ve been employed or enrolled in college for the past two years.
What is Your Next Step?
Many first-time home buyers want to jump right in and start looking for homes on the market. However, your first step really should be to talk to an Arbor Financial mortgage specialist. By doing so you can understand what your lending options are and establish a budget. There are so many mortgage products and options that you may not be aware of, like our low and no down payment mortgage or our ability to eliminate PMI payments. It makes sense to talk to our team so we can offer personalized mortgage options for you.
Then, assuming you’re ready, its time to get pre-approved! Most real estate agents won’t start showing you homes until you have a pre-approval letter which lets them know that you can afford the home and you are a serious buyer.
With your pre-approval letter in hand, now it’s time to work with your local real estate agent to shop for the perfect home!
Our mortgage team is happy to answer any questions you have – contact them here.