Buying your first home can be an amazing experience. It’s exciting to hop online and survey the home’s that are for sale out there. You start to imagine the possibilities as you scroll through the pictures and get an idea of what life may look like if you lived in this house, or that house, or…..no wait, that house! “My TV would look amazing on that wall in the living room,” you think to yourself as you move on to visions of backyard parties with your friends around the glow of the firepit that would fit perfectly on the patio in the back.

But while it is fun to imagine all the possibilities, the virtual online tour should actually be the second step in the process for first time home buyers. The first step…getting pre-qualified at your local bank.

I spoke with Annemarie O’Conner, a mortgage broker with Custer Federal Savings and Loan here in Kearney about the importance of getting pre-qualified BEFORE starting the home buying process.

Why should getting pre-qualified be the first step in the home buying process?

“Getting pre-qualified should be the first step in the home buying process because you need to know what price rage you should be looking in,” O’Conner said.  “You do not want to fall in love with a property that you cannot afford.  It is best to know ahead of time what your buying potential is and what your monthly payment will be.”

Basically, you need to know how much the bank will loan you to purchase a home before you start looking. This way, you can spend your time and effort looking at homes that are in your price range.

What is needed to get pre-qualified? 

“Generally, we would get an application completed with basic information so that we can pull a credit report and calculate income.  It is good to have paycheck stubs or tax returns if they are available,” O’Conner said.

The application process is not that complicated, and with some banks, it can be started and submitted online at your convenience.

The credit report will help determine what rate you can get, and exactly how much the bank is willing to loan you for the purchase of your new house.

You will want to get together one to two months of paycheck stubs, your tax returns for the last two years, and any other financial information that may be needed to get the process started.

This is also an important step in the process for those of you who may be reading this and are not ready to purchase a home in the near future. While it is always a good idea to keep track of your credit report (you can check your credit report for free by going to annualcreditreport.com), it is very important when you are trying to get pre-qualified.

If you have a high balance on a couple of credit cards, or have been late on payments for a car loan, these can count against you and lower your credit score. For more information on how your credit score is calculated and what information goes into it, you can find out more here.

If you haven’t already done so, sit down and take a look at your monthly expenses. Find the expenses that you pay on a monthly basis, and, if possible, set them up for monthly automatic payments. Even if all you can do is make the minimum payments, like on your credit card, at least you will be making the payments on time. Late or missed payments can really hurt you down the road.

Are there unique loans for first time home buyers? 

“There are first time home buyer loans available for those who qualify, said O’Conner. “Home buyers must meet income qualifications set by the program.  These loans do allow for lower down payment requirements, cheaper mortgage insurance rates, and often times a lower interest rate than that of other loan types.”

Are there any grants available for First Time Home Buyers? 

“Yes, grant funds are also available to first time home buyers that meet the programs qualifications,” O’Conner said. ” The amount available can fluctuate dependent upon the grant fund program, but this year (2020) there is $5,000.00 available for down payment assistance.” 

Why is a working with a local mortgage broker a good idea? 

“Working with a local lender can be helpful in that we are more familiar with the housing market.  We understand what you are types of property you are able to buy in certain price ranges,” O’Conner said.  “We work very closely with local insurance agents, realtors, title companies, and appraisers to allow for on time closings and a more seamless process for the buyer.  Buying a property can be overwhelming for some people and the last thing you would want is for a non-local lender to lose track of your file and be asking for things the day before closing.”

I want to echo what Annemarie had to say on this point. As an insurance agent, I usually get more involved towards the end of the sales buying process. I have worked with clients that, at times, are at the end of their rope, and just want it to be over with. But it doesn’t have to be that way.

A local lender has the opportunity to get to know you better, how you communicate best, and help prepare you for what road ahead looks like on this journey. With an online lender, you are communicating via email and phone, and that can make things frustrating with closing date fast approaching.

If someone is not quite ready to buy a home, but wants to make sure their finances are in a good position for when they do, what steps can they take now? 

“Establishing a relationship with a lender would be a good start.  Visiting with them on what your goals are and what you want helps them evaluate and your situation and steer you in the right direction,” O’Conner said.  “As with anything, being mindful of what your income is and what debts you have and having timely payment to build credit is always a good start.”  We touched on this earlier. It is important to know what your credit report looks like, and what steps you can take to improve your credit score. But taking the time to find a mortgage lender that will work with you to develop a plan, and see it through, is huge.

“A plan is only as good as those who see it through.”

-Anonymous

Here in my town of Kearney, NE especially, right now, the number of homes on the market is low. Homes are going on the market one day, only to be gone the next (literally the next day)!

Which is why this step is even more crutial. When you are pre-qualified with the bank, you can walk into that open house with confidence. If it feels right, you can tell you realtor, “This is the one.” A buyer that is pre-qualified also make the seller feel better, because they know that you don’t have to go back to the bank to make sure you can afford it. And they can do what they want to do…sell you this house!!

I hope this helps give some direction. For more info on making the process of buying your first home easier, check out these other posts on our site. Best of luck out there!

A Where To Start For First Time Home Buyers

Why Hiring A Realtor Is A Smart Move