As the housing prices have continued to fall you may have thought of becoming a homeowner for the first time. But before you rush out to apply for a first time home loan, you will need to do some homework.
What I would suggest you do first is to check the stability of your job, or income. If there is any chance that the company you are working for will be laying off workers or shutting down in the near future, you may want to wait just a little bit. Same goes for if you have your own business. How reliable is your income. These are important questions to review, because if you are able to get a home loan you will need to be able to repay that loan.
Okay, after you have checked your income, whether it will be consistent and reliable for the near future, you need to start looking at your credit report if you haven’t already. You can obtain a free credit report once a year from the three main credit reporting agencies. After you have your credit reports in hand double check everything on the list. If you find you have any unpaid bills on the list you have forgotten about, take care of those. (Pay them or start making payments) If you have any bills on your credit report that are not yours find out how and why these are on your credit report. Then work to have these removed.
After you have made sure you will have income to repay a home loan, and made sure your credit report is accurate, with no outstanding collections on your report. You need to look at all of your current bills, and determine what you can reasonably afford to pay on a home mortgage. There could be a big difference in the dollar amount of a home loan you qualify for, and what you can reasonably afford.
Just because you may qualify for a home loan of say a hundred thousand dollars, that may not be a wise choice for you, to take a home loan for that amount. Because this reduces the amount you can put into savings or use for other things. You really don’t want the majority of your income going into repaying a mortgage do you? It is nice to have some money to use for vacations, gifts, travel etc.
After you have decided what you can reasonably afford each month as far as a mortgage payment, and you have double checked your credit report, you are ready to begin talking with your bank about a home mortgage loan.
Decide what you can reasonably afford on one income with no overtime or bonuses, then don’t allow yourself to be talked into accepting a higher mortgage with higher payments. You need to have breathing room in your household budget, so you can put some into savings for emergencies or unexpected events.
You’ll enjoy your home more if you know you can repay the mortgage.