Guide to Home Financing for First Time Homeowners

Guide to Home Financing for First Time Homeowners

Home buyers prepare paperwork to buy a new home with a financial partner.

January 28, 2022

Before you begin browsing floor plan options and dreaming about your interior design ideas—figuring out your financial plan is key to beginning your home buying journey. At Gemcraft Homes, we are just as excited as you are to start designing your dream home, but it’s important to know exactly what you can and cannot afford before getting too deep into the process. Read on to see a few of the key items you need to check off your list before your home buying journey really takes off. 

Boost your credit

If you’re in the beginning stages of looking for a home, it’s never too early to start boosting your credit score before the time comes to seek out a mortgage lending professional. 

First, you’ll want to try and keep any major purchases to a minimum. Anything from buying a new vehicle to applying for a new credit card is known as hard inquiries on your credit, and if you have too many of them—they can have a negative impact on your credit score, and it can sometimes take up to one year before they stop counting against it.

Next, you’ll always want to keep an eye on what the limit of your credit card is. If you’re able to keep the outstanding balance at 10%, you’ll start to see an improvement in your credit score. Don’t worry if this isn’t a possibility at the moment, though—keeping it below 30% is always a good rule of thumb. 

If you’re still worried about how your credit score could affect your chances of getting pre-approved, our team is happy to put you in touch with some financial professionals in order to get you back on track with your credit score. 

Figure out what you can afford

When you start contemplating the idea of transitioning away from renting toward owning your own home, it’s important to get an accurate idea of what you can afford. Our online mortgage calculator is a great tool to use to get a rough idea of your price range, and our preferred lender can help you get a more detailed answer to this question. 

Get pre-approved

Whether you’re using our preferred lender or your own mortgage lending professional, the next step is to get pre-approved—and there are a few things you’ll need to have ready for this step before you meet with your lender. 

  1. Identification: You’ll need to have some form of identification available to share with your lender like a driver’s license. 
  2. Proof of income: For proof of income, your lender will require you to provide W-2 statements and tax returns from the past two years, pay stubs showing income and year-to-date income, and proof of any additional income such as alimony or bonuses, if applicable. 
  3. Proof of employment: Your lender will need you to provide proof of steady employment over the past two years. If you have changed jobs within this timeframe, your lender will verify any additional details needed with your previous employer. 
  4. Proof of assets: Any current bank statements or investment account states that house all of the funds you intend to use toward your closing costs and a down payment will be needed.
  5. Credit Score: Your lender will need your social security number in order to pull your credit score—this will show them your ability to pay off your debt and will affect which loans you will be able to be approved for, how much your down payment can be, and what your interest rate will be.

Buying a home for the very first time should be an exciting part of your life, and our team at Gemcraft Homes wants to ensure that you have everything you need to make the process as smooth as possible. Our team will be with you every step of the way, so if you’re ready to get started on your next adventure in the world of homeownership—take a look through our incredible communities, and give us a call today at (800) 291-7436 or fill out our online form to set up a tour today.

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