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Before you start shopping for your property, it is a good idea to make some preparations.
Build Your Green File.
A green file contains all your important financial documents. You will need it to secure financing for your property. The typical green file should contain:
- W-2 Tax forms – or business tax returns if you’re self-employed ‒ for the last two or three years for every person signing the loan.
- At least one pay stub – for each person signing the loan.
- Two months of bank or credit union statements – for both checking and savings accounts.
- Addresses – where you’ve lived for the last five to seven years, with names of landlords if appropriate.
- Brokerage account statements – as well as a list of any other major assets of value, such as a boat, RV, or stocks or bonds not held in a brokerage account.
- Your most recent 401(k) –or other retirement account statement.
- Documentation to verify additional income -such as child support or a pension
Check Your Credit Rating.
Your credit score will have a huge impact on what type of property you can buy, and at what price. It is first recommended to check your credit rating with an experienced lending institution so that we can determine what you can afford. The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian and Trans Union. I will be happy to recommend experienced, knowledgeable lenders in the residential, construction, and commercial and investment real estate fields.
Be Careful With Your Finances.
Now is not a good time to make sudden career changes or large purchases. You want to approach your property purchase from a position of financial stability.
The search for your new home has begun. No matter how long or short your search may be, you will need financing once you find your dream home.
You can pre-qualify for a loan which will allow you to know in advance exactly how much you can afford, this is the amount a lender is willing to let you borrow. Knowing this number will save you time as you are able to search for homes within your budget.
Getting pre-approved for a loan means that you have a tentative mortgage commitment from a lender. You have provided the lender with the necessary documents and information for them to approve a loan amount. This process requires a credit check as well as processing fees. You will be given documentation that states your loan amount which allows the seller to know that financing is secured. However, the actual mortgage and interest rate will not be granted until the property appraisal and title search come back clean and in proper order.
How much home you can afford can be determined by your down payment amount, your credit history and score as well as you debt to income ratio. A mortgage calculator is a great tool to help you work through the numbers.
Due to stricter federal requirements, most loans will require a down payment which is typically anywhere from 3.5% – 20% of the house price.
These are loan processing fees that you are required to pay to acquire a mortgage. The full amount is due the day of closing and can be rolled into your mortgage. Closing costs can range between 2% – 5% of your loan.