The process of buying a home is truly exciting for first time homeowners. Browsing through photos of all the different houses for sale, contacting the seller or owner and visiting the house are just some of the first things that come to mind after deciding you want to become homeowners. The most fun part for you in the process is imagining yourself in that new home you’re looking at….no doubt a great inspiration!
There are a couple of things a homebuyer should do before browsing homes for sale, however, and these things primarily focus on preparing yourself financially. According to experts, mortgage loans today have become more complex with more restrictions and requirements. Homebuyers need to provide more proof that they can afford to buy a home. This does not only benefit lenders and home sellers–it’s also meant to benefit buyers, particularly to help protect them from bad lending practices. It’s so easy to get caught up in the moment and go into debt with a mortgage you can’t really afford. In the past, banks and lenders have not been very responsible in preventing this, which is ultimately what led to the housing market collapse in 2008.
This is why it is important for most of today’s homebuyers to be able to secure their finances and prepare financially before jumping into the fray of the housing market. Here is a simple to-do list to help you be financially prepared:
Finish tax filing
Keep in mind that one of the things that a lender looks at is your most recent tax returns. The primary reason for this is because this is the most legit document they can look at to confirm and verify your income and financial eligibility in buying a home. Although you will show lenders other alternative documents to prove your income, banks will still want to have a copy of your latest federal tax return.
Secure other important financial documents
These are primarily the documents that show your income for the last two years. Basically, these are the alternative documents that banks and lenders will look at to verify and confirm your income along with your tax return. These include W-2s, previous years’ tax returns and, if you are self-employed, 1099 forms from the IRS to your show your self-employed income.
Also, if you have a family business where you are owner or co-owner and which is also a source of your income, you will have to prepare copies of corporate tax returns for the past two years. Keep in mind that to be able to prove that you can indeed buy a house and pay for the loan and mortgage insurance, you will need to show proofs of all your assets and sources of income. The more assets you show, the better you will prove your financial ability and the easier you will get loan and mortgage approval.
Aside from proving you are financially capable of paying for the loan and mortgage, these financial documents will also help prove that you will not be financially drained after buying a house. In fact, your debt to income ratio should not exceed 43 percent so you still have enough reserves for your other expenses such as insurance payments, utilities and other homeowner’s fees.
Fix your credit report
Your credit score is one of the most important factors that lenders and banks look at to determine whether or not you are able to afford buying a home in Myrtle Beach. Most experts suggest doing this at least 6 months to one year before your home purchase. This will give you sufficient time to improve your credit score and further impress lenders and banks.
Aside from improving your credit score, however, you also have to work at finding credit report errors and having them fixed. Keep in mind that credit report errors do happen, and it is up to you to check your credit reports and look for these errors, including missed, incomplete or late payments. If you have kept all your receipts, you can easily prove this. Note that fixing these errors may take up to 3 months, so you need to do this earlier to ensure your credit report is error free.
Research home prices and know how much they can afford
After securing your financial documents, you know how much money you have to work with for buying a home. With this information, do some research on the current home prices of the areas where you plan to buy. Note that the housing market in Myrtle Beach may be different than other areas.
Knowing home prices and how much of a loan you can qualify for, makes it easy for you to look for that perfect house. Additionally, this will also help you make a smarter decision on how much to offer on the house that you are looking to buy and outbid other potential buyers.
Preparing financially is necessary to make the homebuying process easier and less complicated. Do it correctly and you will save yourself from days of frustration, stress, disappointment and pressure, which takes out all the fun and excitement that you had when you first decided to become homeowners.
For professional assistance in buying a home in Myrtle Beach, call Full Potential Real Estate, LLC now and inquire about their services.
Full Potential Real Estate, LLC
Myrtle Beach, SC 29577