If you are buying a home, a homebuyer financial checklist is essential. If you think being emotionally ready is the hard part just hold on a minute. Before you make an offer to purchase a house, you need to prove you are financially able to handle the responsibility.
Do I need a Homebuyer Financial Checklist?
The simple answer is yes you do. You have no idea how a lender will poke, prod, and examine your financial footprint when you apply for a mortgage. Get ready to answer questions and provide documentation on your economic status and history.
To help you sort through the confusion and help you decide if you are in a position financially to buy a home I have a homebuyers financial checklist for you to work through. Ready? Then let’s get started.
1. You Have an Income Stream
The first item on the homebuyers financial checklist is a job. You need a steady one that pays you enough to afford a mortgage, taxes and insurance payment monthly. A rough estimate you can use is 30-35% of your monthly gross pay.
2. Next Homebuyer Financial Checklist Item is Downpayment.
Although the optimum number you will hear bandied about is 20% of the sale price, do not panic if you haven’t got that much money. Most first-time homebuyers do not. Many programs out there will approve a mortgage with as little as 3% down with decent credit. If you are a first-time buyer, you may even qualify for downpayment assistance or be able to use money gifted to you by a relative. Give Aunt Sally a call.
3. Homebuyer Financial Checklist – Closing Costs
The cash you will need doesn’t end with a downpayment. You will also need to scare up 2-5% of the sale price to pay for closing on the mortgage. Again, if you don’t have the money or have it earmarked for other reasons, you can add it to the purchase price and finance the costs if the seller has no objections.
4. Miscellaneous Homebuyer Financial Checklist Items.
Don’t even think about not having a home inspection. The average cost of $350 is a bargain compared to what it might cost you down the road for something significant that an inspector would have pointed out to you.
Then there is the bill for moving all your stuff from your old home to the new one. If you have friends, who work out and own a truck lucky you, maybe they will help you move for the price of a pizza and some brew. Otherwise, you might need to rent a Uhaul. If you need a professional mover, it can cost you a few hundred depending on how much stuff you have.
Last but not least before we move on to the previous item on the homebuyers financial checklist, you should have a buffer against the unexpected repairs that will inevitably pop up. Also known as an emergency fund, having one might spare you sleepless nights of worry about what you’ll do if the water heater gives it up or the town asses you on your taxes.
5. Good Credit – Check
If you have never checked your FICO score now is the time to do so. The facts of credit life are the better the score, the better the terms you will receive from a lender. This is true not only for a mortgage but all types and varieties of consumer loans. If your score is dismal, you might want to beef it up before you apply for a mortgage. Just a difference of a quarter point in your interest rate can save you thousands over the life of the loan.
I hope this little homebuyer financial checklist helped. Good luck!