What to Know Before Buying a Home (Part 1)

first time homebuyers

Buying a home is likely one of the biggest purchases you’ll ever make. With such a daunting road ahead, where do you even begin? That’s where we come in!

We’re here to be a resource for all homebuyers as you begin your journey to homeownership.

What to Know Before Buying

You should meet with a lender before house shopping. The first step in the process is to meet with a trusted Mortgage Advisor to discuss your goals and review your financial information. Knowing what you can afford before you look at houses, could save you time, stress, and money.

If your lender is local, they’ll most likely have a list of recommended real estate agents in your area. If not, then this is the time to reach out to friends, family, people on social media, etc. You can also use search engines to look for highly-rated agents, such as Zillow or Yelp.

An approval can increase your buying power. An approval holds more weight than a pre-approval and could enhance your negotiating power in a competitive market. At Pacific Residential Mortgage, we have a quick, upfront approval process that reduces time and stress, so you can shop with confidence.

A large down payment is not necessary to purchase a home. A 20% down payment may be the best option for some homebuyers. However, for other buyers looking to purchase their first home or who need more financial flexibility, it’s important to have a variety of loan options. PRM has several mortgage options with little to no down payment, including:

  FHA Loans: 3.5% down payment minimum
  Conventional Loans (with PMI): 3% down payment minimum
  VA Loans: 100% financing
  USDA Loan*: 100% financing
  Jumbo Loan: 15% down payment minimum (with no PMI)

Depending on your financial situation, it may make more sense to put down less on a home and invest in the market or use any additional funds for closing costs and renovations. MoneyUnder30 says it best, “… life is never so neat, so you have to factor different risks into the mix and proceed accordingly.”

Debt shouldn’t discourage you from buying a home.
Did you know there are loan solutions that can potentially help applicants, even those with student debt, qualify for a mortgage?

A 2018 report from The Institute for College Access and Success (TICAS) shows 65% of graduating seniors from public and private nonprofit colleges had student loan debt? In Oregon alone, the average amount of student debt in 2017 was $27,885. The figures increase even further for post-graduate studies.

So, what does all this data mean?
Basically, we’re saying that if you have student loan debt, you’re not alone. Your Mortgage Advisor will be able to help guide you toward the right decision for your long-term financial success.

There are loan options for all types of buyers.
At PRM, we understand that your financial situation is unique. This is why we offer a wide variety of products and services to meet your long-term goals. Our Mortgage Advisors spend extensive time evaluating your financial situation to determine which home loan would best fit your needs.

For you, an FHA loan with a low down payment requirement might be the way to go. Or maybe you need a home loan that falls outside the bounds of traditional mortgage parameters. Regardless of your situation, you can feel confident and empowered as a homebuyer with PRM.

You need a lender you can trust.
When it comes time to buy a home, you need a trusted, local lender who is easily accessible and willing to meet with you face-to-face. As Mortgage Advisors, they’re here to educate and guide you through the entire homebuying process, from start to finish.

How to Prepare Yourself

If you’re about to buy a home, it’s important to ask yourself the right questions, such as:

  Can I afford a down payment?
  Can I afford the additional costs of moving (closing costs, furnishing, movers)?
  Will I need to move within the next 5-8 years?
  Do I plan on needing additional space for children or aging family members?
  Is now the right time to buy in my area?

If you’re unsure of what you can afford, you can always discuss these concerns with your Mortgage Advisor.

You will also need to begin gathering the necessary paperwork to apply for a mortgage. Your lender will be able to give you a full list of what’s needed, and they may even require additional paperwork once the process starts. In the meantime, you can collect the following:

Tax Returns. Generally, your lender will want to see at least two years’ worth of tax returns to make sure your annual income is consistent with your reported earnings. If you’re self-employed, your bank statements may be evaluated instead.

Pay Stubs or W-2s. Your tax returns will give your lender a good idea of what your overall financial standing looks like. In addition, your pay stubs will help them evaluate your current earning. You will most likely need to bring at least one months’ worth of stubs.

Credit History. As a borrower, your lender will need to assess your credit history to make sure you’re reliable and not a risk. The minimum credit score required to be approved for a home loan will vary. For example:

Bank Statements. Your lender may request bank statements to verify you have the correct funds for a down payment and that you have the ability to pay off your mortgage for a few months strictly out of your reserves.

Identification. You will need to provide proof that you say who you are. A driver’s license will suffice. You may be asked to provide additional proof of identification if you are applying for a Foreign Nationals Loan.