Home Buyer's Basics

Home Buying Basics - The Do's and Don'ts of Home Buying.

Understanding Income and Assets when using home buying programs.

No matter what program you are using there likely will need to be a review of your income and assets.

Understanding how lenders look at income and assets is critical to making the buying process easier and less stressful on you and the lender.

There tends to be two types of incomes, W'2 and 1099. If you are salaried you should get a W2 at the end of the year for taxes. This will include basic information on income, withholdings and deductions. Most lenders require 2 years of W'2s to determine the borrower's income. There are some caveats to this, lets say you are in school or have been doing an unpaid internship, you may be able to use that time along with an 'employment offer letter' and 2 months of pay stubs to show income. So even though you do not have 2 years of employment, you may still be able to qualify.

1099 or self employed income can get a bit more difficult to determine average income because self-employed borrowers tend to have varied income and a variety of tax write-offs. If you own a business you may need to present the schedule C in order to determine the write-offs and real income. As with W2's borrowers, 1099 borrowers need 2 years history of income. 
Assets TIP - Do not move money around without tracking it!
A major pitfall that may occur is transferring of money between accounts once a loan is in processing. Borrowers may have several checking or savings accounts but moving money around without tracing the transaction may cause a loan underwriter to not allow some of those funds to be used. It is critical to get statements from both the account money is coming from and the account money is going into prior to moving funds and after depositing the funds. If you are getting a gift to help with closing or down payment the same process of transfer tracking should be followed, including getting the statements from the person giving the gift.

Do's & Don'ts
When Home Buying Using Assistance & Grant Programs.

Do not make an offer on a home without first being pre-qualified for financing. 

Do get pre-qualified. Being pre-qualified will allow you to know what amount you can afford. It may also allow you to gain an advantage over competing offers for a property

Do not open accounts or additional trade lines while in the home buying process.
If you are about to buy a home it is understandable that you would want new home furnishings but you should wait until you close/settle on the new home before buying large items.

Do hold off on buying large items using credit or using the funds saved for closing. Trade lines can affect the DTI (debt-to-income) ratio. This is a calculation used to determine a persons ability to pay a loan. More trade lines may decrease the amount that you may be qualified for and open accounts could negatively affect qualifications.

Do not attend a home buying course until you discuss which assistance program you may qualify to receive.

Do discuss your qualifications and needs with an approved lender for any assistance program prior to attending any home buying course. Different programs may require a borrower(s) to attend a course and gain a certificate of completion. Courses may vary and some assistance and grants may require only certain approved courses be taken.
 

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