Many first time homebuyers launch into the market, find the perfect home, and then decide to look at getting a mortgage. Imagine the disappoint when they are declined and the perfect nest slips from their grasp.
That's because the buyers have the process backwards.
Yes, for many prospective homebuyers, the process can seem daunting and maybe even overwhelming. For first-time buyers, there are many obstacles that may prevent them from owning their own little piece of the American dream.
One of the biggest potential obstacles is obtaining credit to buy a home. Increasingly tight credit standards may be squeezing out potential buyers, but the Independent Community Bankers of America say they’re willing to help. Of course, big box retailers, such as Wells Fargo (WFC), and nonbanks such as Nationstar (NSM), could also help first time homebuyers get mortgage. And this advice is applicable not just to the community bank crowd the ICBA represents, though they'd argue that community banks offer a higher level of service for potential homebuyers.
“Buying a home is likely the biggest purchase anyone will make, and community bankers are an excellent resource to help guide consumers through the process,” said John Buhrmaster, ICBA chairman and president and CEO of 1st National Bank of Scotia, New York.
“With new mortgage rules and regulations in place, community bankers are available to help potential homebuyers by providing accurate and well-informed information,” he continued. “Community bankers across the country can help their neighbors in their local community find mortgages that fit their financial needs, budgets and lifestyles.”
The ICBA says prospective buyers should do the following to make the home buying process a little easier for themselves:
1: Earn and spend
Know your monthly income and budget, including how much you spend on rent, utilities, entertainment, clothing, food and transportation.
2: Talk about it
Discuss your finances with a planner at a bank before you begin looking for a home. It is important to stay within your means when purchasing a house.
3: Have a paper trail
Gather and organize paperwork and documents. Items you should have readily available include paycheck stubs, W2 forms, tax returns and bank and investment statements for the last two years.
4: What's your FICO?
Check your credit report so you are aware of what your current credit score is before applying for a loan. Credit reporting agencies must give you one free report annually.
5: Bad FICO? Fix it.
Maxing out credit cards or falling behind on other loan payments could create issues when applying for a mortgage. Keep tabs on your spending habits before applying for a mortgage, and don’t go on a spending spree afterwards either.
6: 30-year fixed? Really?
Work with a banker to figure out how much you can borrow and which mortgage product is right for you. Your local community banker can explain available mortgage options- including rate adjustments, fees and other loan features - so you are prepared for the loan closing and not surprised down the road.
7: Rates. Rates. Rates.
Learn what current mortgage rates are. This will greatly impact your monthly payment. A banker can explain this to you well before you set your sights on the perfect place.
8: You may get help
Check with your state, city and county government agencies for special first-time-homebuyer loan or grant programs available to assist with down payment and closing costs.
“Community bankers work with their customers and help give advice on finding mortgages borrowers can afford,” Buhrmaster said. “There are plenty of steps to complete to ensure the home buying process goes smoothly and community bankers are on hand to help with this. They can help customers determine the most affordable mortgage options and are available to provide additional financial guidance if needed.”