I never know what to say when people ask us if we own a house.
Yes, we do, but technically, no, we don’t.
You see, when we were looking to purchase our first home, my husband had just started a new job. That new job had a variable income. The banks were pretty conservative in who they were giving loans out to since they were being burned by people who couldn’t pay them back. They wanted us to have a two year work history at the SAME job if they were going to accept a variable income like ours. Well, I was 7 months pregnant with baby number two and we needed more space. Our in-laws were insanely generous and bought the house we wanted and are currently renting it to us until we are approved for a mortgage.
Well, the time has come.
We’ve already got the house picked out. (We’re living in it!) Now we have to do the tedious process of applying for a loan.
But I’ve found out, it doesn’t have to be as painful as I imagined if you start to get your ducks in a row early on. Here’s some things I’ve learned.
Know What You Can Afford
This can be hard, especially when you have a variable income like us, but always better to err on the conservative side. Nobody needs the stress of scrounging for a payment. A basic rule of thumb is to look for houses 2.5 times more than your annual income. Ideally, your mortgage payment should be under 28% of your monthly income. There are plenty of mortgage calculators out there to help you crunch the numbers.
Gather the Documents
This is a tedious but important step. Gather a couple years worth of tax returns, print out your checking and savings statements, pay stubs and proof of employment history (like W-2s) and any other investment paper work. You need to prove that you’re reliable and can handle the financial burden.
Know Your Credit Score
Speaking of responsible, do you know your credit score? Those three numbers make a big impact on how lenders view you. Knowing your current credit score ensures they’ll be no surprises and you can deal with any unsightly marks that may have been in error.
Get Rid of Debt and Save
Now that you know your credit score, why not pay off some debt? Have a car that’s almost owned, finish off those payments. Don’t make any large purchase on credit near the time of your home purchase, it will hurt you.
And save! A 20% down payment is the standard and comes with the extra benefit of not needing to purchase mortgage insurance. (Yes, there is in fact insurance for everything!)
I learned a ton from perusing Capital One. They earnestly want to make the home buying process easier for newbies like me. Their online learning center features easy-to-understand articles and helpful videos, as well as information about Capital One’s Home Loans. It’s such a great resource! If you’re interested in learning more about Capital One Home Loans and how they can help you get a home, visit https://www.capitalone.com/home-loans/direct/learning-center or call them at 855-900-8886.
I was selected for this opportunity as a member of Clever Girls and the content and opinions expressed here are all my own.