As a first-time home buyer, taking the plunge to home ownership is a big step. You need to be feeling good about your personal debts and cash flow. Here is what you want to consider when researching so you can make the most informed home buying decision…
The things you should consider when deciding whether to purchase a house here are the three ingredients that it takes to buy a house: your cash, your credit and your income. To be successful as a home buyer you need to have a healthy blend of all three. Purchasing a house is equivalent to baking cookies from a financial standpoint. If you put in too many chocolate chips the cookies are not going to turn out properly; it must be the right amount of each ingredient. Same holds true when purchasing your first home.
What is your income doing? Is your income stable, going up or going down in the future? Are you going to be relocating at some point in the future? How much will you be able to save after a proposed mortgage payment and your other monthly expenses including any car loans, student loans or credit cards? These are the sort of things that can impact this financial decision.
Here is how you want to approach this with a lender… let’s say you’re thinking 10 to 12 months out based on your personal desire to purchase a home. You call around to a couple of lenders and you ask them what home buying options they have? That’s the wrong approach, because no lender can accurately, with integrity, give you all sorts of options unless you’re willing to put the first foot forward financially.
More specifically, a lender is not going to have an answer to what home buying options are available to you as every borrower and every family is uniquely different. It’s too broad of a question.
What you need to do is pick a lender who is more interested in your specific financial criteria than they are interested in granting you a loan. That’s a hard thing to find as many lenders will just do whatever you tell them to do. You want a lender that comes from an advising standpoint who can clearly and accurately articulate where your income is, how financially sound this is and might mean for financially. You can go get a mortgage anywhere, but the loan officer that you work with that takes a proactive approach in really advising you about getting a mortgage. That’s the person whose advice you should be taking to heart and that advice might mean not buying a house right now and getting some homework for some things to accomplish in the future and that’s quite ok.
When you engage with the lender, if they ask you to provide a loan application, do it. If they ask for the financials such as tax return for example, pay stubs or W-2s, provide them. A lender cannot and should not prescribe programs to you without having an actual basis to support anything that they’re recommending. If you have a lender recommending a loan program to go with and they have not seen your credit or supporting financial documentation turn around and run.
Do you want a lender that is willing to meet with you face-to-face to help you decide about buying a house or do you need a plan to become pre-approved in the future? Not all lenders operate like this. There are no one-size-fits-all home buying options for you and your family.
The best thing you could do for yourself financially as a would-be first-time home buyer would be to talk to a lender, complete a loan application (which is non-committal by the way) let them pull your credit and provide the supporting documentation they need and go sit down with them face-to-face. Yes, it’s going to require an investment of time on your part.
Here’s the question you should ask yourself: is the inconvenience and the pain of putting together the financials and allowing the lender to look at my credit report and give me advice more painful than my current renting situation? If the answer is yes, don’t purchase a house and continue renting. However if it’s not, in other words, if it’s more painful to continue to rent and your desire to gain is greater than the inconvenience of sitting with the lender, then by all means go sit down with someone who can pragmatically answer your questions so you can get the full clarity experience you deserve as a first-time home buyer.
It is possible for some lenders who might have different opinions about what you should do or not do is ultimately the person that can make that decision and also should be you. You want the lender that is going to custom tailor a mortgage specific to your goals and where you are financially at whatever point in life you are.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.