• About
  • Mortgage Basics
  • $40K Challenge
  • Aunt Doris
  • Grandfather Says
  • Privacy
  • Archives

Len Penzo dot Com

The offbeat personal finance blog for responsible people.

5 Basic Tips for First-Time Homebuyers

By Sabado Domingo

Buying a house for the first time can be a thrilling and nerve-wracking experience. Although the learning curve is steep, doing a bit of financial homework will make the task a lot easier. With that in mind, here are a few tips that will help make your experience as a first-time homebuyer as painless as possible.

Check Your Credit

Your credit score is the most important factor when it comes to qualifying for a loan, so you’ll need to scrutinize your credit report for mistakes; if you find any errors, you should correct them before applying for a mortgage. Just because you pay your bills on time does not mean that your credit is excellent. Your utilization rate, which is the credit you are using versus the credit available to you, will affect your credit score.

If you have a low rate of utilization, your credit score will be much higher. A first time homebuyer needs to have used less than a third of his or her available credit. If you owe more money than this, you might have to work on your credit first before you qualify for a mortgage.

Evaluate your Liabilities and Assets

If your payments are current and you do not owe too much, you need to assess how you spend your money. For example, do you have enough money left over after paying your monthly expenses? You need to know what is owed and what you are getting.

You need to know how a lender will view your income, which means that you should familiarize yourself with the basics of mortgages. If you don’t earn enough to save for a down payment, you should check whether you qualify for a VA home loan, in which case you can get a mortgage with little to no down payment.

Organize Your Documents

You need to have your taxes and proof of income ready when applying for a mortgage. The lender will ask for two of the latest pay slips, tax returns, and W-2s from the past two years. Lenders want every page of your bank statement — including the blank ones — so you should not throw those away.

Make sure that you look for your documents before approaching a lender to save time.

Qualify Yourself

You need to know how much house you can afford. You can do this by considering the down payment and knowing your debt-to-income ratio. This information will help you to know what you can afford per month and upfront. Your expenses should not take up more than 28% of your gross income. Knowing how much house you can afford will help you to keep your expectations in check.

Figure out the Down Payment

Coming up with a down payment is no easy feat because a mortgage deposit is, well … a big chunk of cash! If you have put away some money in your savings account, then check to see if you have enough to cover 20% of the home’s value — this is because a 20% down payment relieves you of the need for mortgage insurance, which is quite costly.

If you do not have enough money for a down payment, then you should curb your spending habits and cut back on a few luxuries. When applying for a mortgage, the lender will look at your spending habits as well as your deposit.

Once you know how much you can afford, the process of house hunting can begin. Looking for a house is a lot of fun. Just remember, it’s important to not only consider the aesthetics of a home; be sure to look at the neighborhood too.

Photo Credits: stock photos

3 Comments May 4, 2018

Comments

  1. 1

    RD Blakeslee says

    If you are not entirely captive to circumstances you are not willing to drastically change, You CAN rearrange your life to, among other libertarian circumstances, build your own house.

    As with all real estate enterprises, “location, location, location” is paramount.

    Reply
  2. 2

    betway88 says

    this is good information for home buyers

    Reply

Trackbacks

  1. 4 Home Financing Options for People with Poor Credit – Len Penzo dot Com says:
    December 21, 2018 at 4:16 am

    […] seem like a financial death sentence; a trap that people are unable to escape. Fortunately, when looking to finance a home, there are some ways to get past your poor credit.With that in mind, here are some home financing […]

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Question of the Week:

Are you expecting an income tax refund this year?

View Results

Loading ... Loading ...

Recent Posts

  • 5 Ways You Can Save Money on Groceries This Week
  • Economic Collapse 101: How to Prepare for Water Supply Disruptions
  • Black Coffee: Painting the Town Red
  • 5 Ways the Oil Industry Affects the US Economy
  • An HVAC Professional Teaches High School Students About the Field
  • The Fastest Way to Improve Your Credit Score
  • How to Determine How Much Rent You Can Really Afford
  • A Simple Test to Know If It’s Better to Rent or Buy a House
  • Black Coffee: Enter the Dragon
  • How to Measure Your Performance as a Trader or Investor

Disclaimer

This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. In fact, making investment decisions based on information published here, or any other website for that matter, is more than unwise; it is folly. This website accepts advertising in the form of monetary and other compensation; as such, topics of discussion are occasionally influenced by these advertisers. Sometimes, an article may also include affiliate links, meaning, at no additional cost to you, this blog earns a commission if you click through and make a purchase (for example, as an Amazon Associate I earn from qualifying purchases). Remember, you and you alone are responsible for the decisions you make in life, so please contact an independent financial professional for advice regarding your unique personal situation.

Sign up for the weekly Len Penzo dot Com newsletter
Len Penzo dot Com Delivered Weekly
Join more than 30,000 readers and fans who enjoy personal finance and macroeconomics with an offbeat twist!
Invalid email address
Thanks for subscribing!

Popular Now:

  1. 1. My 10 Commandments of Personal Finance
  2. 2. Planning a Wedding? Here Are 9 Ways to Ensure You’ll Pay Too Much
  3. 3. 5 Things Nobody Tells You About Being Poor — for Good Reason
  4. 4. 10 Red Flags That May Signal You’re In Serious Financial Trouble
  5. 5. 4 Good Reasons Why Some Quarters Are Painted Red
  6. 6. Careers You Can Get Into Later In Life
  7. 7. 8 Store Brand Items That Are Superior to Their Name-Brand Twins
  8. 8. Caught Ya! My Teenager’s Sly Attempt to Get His Own Credit Card
  9. 9. 6 Common Mistake People Make With Their 401k Plans
  10. 10. 6 Career Killers — and How to Avoid Them

All-Time Most Popular:

  1. 1. 19 Things Your Suburban Millionaire Neighbor Won’t Tell You
  2. 2. Dear Friend: Here Are 41 Reasons Why I’m NOT Lending You the Money
  3. 3. Why Your Expensive Luxury Car Doesn’t Impress Smart People
  4. 4. If You Can’t Live on $40,000 Annually It’s Your Own Fault
  5. 5. 21 Reasons Why Corner Lots Are for Suckers
  6. 6. 4 Smart Reasons Why College Isn’t for Everyone
  7. 7. 18 Fast Facts About Social Security Numbers
  8. 8. My Ketchup Taste Test: Upset! Guess Which Brand Topped Heinz
  9. 9. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  10. 10. Here’s a Simple Trick for Getting Credit Card Interest Charges Waived

Copyright © 2021 Len Penzo dot Com · All Rights Reserved · Designed by Nuts and Bolts Media

Copyright © 2021 · Penzo on Genesis Framework · WordPress · Log in