First Time Buyer? Ask Yourself These Questions

So, you are thinking about buying your first property. How exciting! Have you gone through your first time buyers checklist?

Buying property is a stressful process no matter what type. From condos and single family homes, to warehouses and office buildings, purchases are purchases. The fun part about being ready to buy property is looking at and touring the inventory. But, you don’t want to find your dream house or your perfect office layout UNTIL going through the checklist below. The purchase of any type of real estate is the largest purchase you will ever make in your life. Are you ready?

1. Can You Financially Afford to Buy Twice?

If there is one financial rule to live by, it is this: If you can’t buy it twice, you can’t afford it. (You aren’t expected to be able to buy a house twice, but think of the financial concept.) Before looking to buy property, look at your savings. Look at the crazy coronavirus pandemic, for example, and how it impacted the entire world! Jobs were lost, people were dying, the economy took hits in every angle, and more. Those who come out winning and not highly stressed during troubling times, are those who were prepared for these times to happen. Your financial standing and habits when things are good will determine your financial standing for when things are bad.

2. Do You Have at Least 20%-30% Cash at Hand to Put Down?

This is a continuation from the explanation above since you need cash upfront. Putting between 20%-30% down payment on a property is typical. The more cash you put down, the sooner you pay off your loan and the more reputable you become as a buyer.

3. Is Your Credit Score at 640 or Above?

Your credit score plays a huge part in qualifying you to buy property. It does not determine everything, but a good score definitely shows that you are responsible with making your payments on time. This builds your credibility that you will be able to keep up with your mortgage payments. The better your credit score, the better chance you have at acquiring a conventional mortgage.

4. Have You Filed Taxes the Last Two Years?

Most banks/lenders will require you to have filed a minimum of two years of reports before purchasing property. As a buyer, this gives you more credibility that you have a source of income and will be able to pay your mortgage. Filing taxes is especially necessary for business owners and sole proprietors. Your bank/lender would want to see that your business has a steady financial operation.

5. Do You Know How Much Mortgage You Qualify for?

Before even starting to search for properties, it is important to know how much you qualify for. You may think you can afford X, but after speaking with a lender, you may find out that you can afford Y. A letter stating your pre-approval is sometimes required in offers to sellers. Additionally, agents do not typically work with buyers who do not provide a pre-approval letter because agents want to know how much a buyer can afford to spend. Your pre-approval letter doesn’t always keep you in the clear, though. If you happen to finance the purchase of another large asset during the time, your credit score can be affected.

6. Do You Have an Ira Account?

If you are first time homebuyer, you are entitled to take up to $10,000 without paying the withdrawal penalty. It is best not to touch this money, but there are definitely benefits to using it if necessary.