This is for all the prospective home buyers who want to be in the position to buy in the future. In order to prepare for your future, you must understand your own perspective. This will enable you to take the proper approach and make your dream a reality.
Approximately 80% of Americans report themselves to be optimistic. The rest? Well, pessimistic. How is this relevant? You'll see... Most people are generally optimistic, which means they want to look for the good things in life, focus on positive, and overall have positive and hopeful attitudes toward their future. This can be a good thing, but it is also bad. Pessimistic people, although sometimes unpleasant, tend to make more careful and calculated moves. They are less likely to spend, more likely to save and put themselves in better financial positions for the future. I am speaking in generalities of course, but there is a real science behind someone's attitudes and how that affects their behavior. Since being optimistic can make us want to spend, a little bit of pessimism can help to balance things out. Pure determination is not enough, you must understand your attitudes and make calculated and conscious efforts toward building your future! Take a moment to reflect on your own perspective and attitudes, and how that affects your finances.
The next step is to understand what lenders will look for when you meet with them to see what you can qualify for. They will ask you for: (A) Last two years of your W-2 income statements, (B) Last two months of full bank statements, (C) Last thirty days of pay stubs. The underwriting process varies between lenders, but all will look for job stability, amount of income, history of consistent earnings, and amount of reoccurring expenses.
Knowing this, following a plan to make all of these look promising to a lender will get you that loan. First, try to get some history with your work. Of course, always be looking for opportunities to advance or change companies/ positions for the sake of considerably higher pay. If you do make a transition between companies, it is best to do it quickly. Months of unemployment in your record can be enough for the loan to get rejected. If your job is more entrepreneurial in nature, then consistent and high earnings will help you out. Consistency is generally the most important of the two.
In the two years you are building your financial position, try to keep costs to a minimum. Make a budget and follow it closely. You can go old school, and write everything in your balance sheets at the end of your check book, or you can get an application on your phone like Level or Sweep, link it to your accounts and track your spending and remaining budget. No matter what you do, start a system to budget, and follow it closely. If you start to waver, don't go for broke, just get back up and try something different if your current system is not working. Best you can, stay away from any and all loans. Car loans, personal loans, student loans, just say no. If you want a home mortgage, you can't have added liability. You may still be able to get the mortgage, but even if you are, the added loan may reduce how much the lender is willing to lend you.
During the preceding two months before you apply, run over your budget and try to cut some extra spending. Eating more meals at home and going out for entertainment less will help. Maximize your income and minimize your spending so when you deliver your bank statements, they will be looking good.
When you finally do apply for pre-approval, if you get rejected or don't get as much as you'd like, don't dismay. Keep at it! Always look for opportunities to advance, creative ways to save, and keep your eyes on the housing market. You may just find something in your budget that you love. When you do, give me a call and I will advise, submit your offer and negotiate on your behalf.
For more information on how optimism and pessimism affect us, click here.
For information about Level Money, click here.
For more information about Sweep, click here.
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