So you’ve decided the time is right to buy your first home…that much is certain. And we can’t blame you, with mortgage rates this low and a real estate market that’s definitely on the rebound. But now what? Before you even get a pre-approval, before you choose a realtor and start house hunting, consider these things first.
Know Your Credit Score
Because there are minimum credit scores to qualify for a mortgage, it’s important to know your credit score. If you’re an ECCU member enjoying the services of IDProtect, one of the benefits is that you have free access to your credit score and credit report at any given time. Otherwise, Federal law entitles everyone to a free copy of their credit report from each of the three credit reporting agencies every 12 months.
Know Your Debt
This is a great example of why it’s important to establish good credit history early on. To apply for a mortgage, you will need at least three active trade lines to serve as verifiable payment opportunities. In other words, they show that you have an established history of making payments, and making them on time. Things like an auto loan, student loan, line of credit and retail card all qualify – as long as you’ve been making payments on them in the past 12 months. If you paid off your student loan a couple years ago – that’s great – but it can’t be counted as an active trade line. So what if you don’t have that many sources of credit? Consider taking out a small loan – even just $500 – just to start making monthly payments.
Round Up Your Liquid Funds
Liquid funds are a fancy word for cash. It can be from money in savings, CDs and investments, maybe 401(k) savings (unfortunately, it cannot be monetary gifts from parents or other family members). You will need to provide statements that prove you have had those funds for at least 60 days.
Gather Up These Papers
This will come in handy down the road when you’re ready to sign the purchase agreement. Without the required set of documents, your loan cannot move forward.
- Two years of Federal Tax Returns and corresponding W-2s
- One month’s worth of pay stubs (two, if you only get paid once a month)
- Any non-ECCU bank statements for the past 60 days
- Two month’s worth of statements from your retirement account(s)
Time On Job
We look for at least two years of work history being in the same industry. Sometimes exceptions can be made, like if you’re a recent college grad and just started your first job, but be prepared to show proof that you’ve been employed or enrolled in college for the past two years.
Watch these videos – and more of our First Time Home Buyers Series – on our YouTube channel.
Our mortgage team is happy to answer any questions you have – contact them here.