A New Year’s resolution that’s definitely worth keeping is to get ready to buy your first home in 2020. The most important thing you can do is begin organizing your financial paperwork. Mortgage lenders will ask you for a long list of verification documents to prove your income, savings, and your personal debt.
The more organized your paperwork, the easier it will be to sail through the loan qualification steps, and find out about the best mortgage options, which might include a zero-down payment mortgage program. Instead of obsessing about trying to save an impossible amount of cash, focus on building a strong presentation to show your lender that you and any partners have the strengths and capabilities to responsibly finance a home. It all starts with the smallest of details.
Here’s what you can do:
- Buy a plastic file box that will hold about a dozen letter-size folders
- Place a large sticker on the box that says “New House”
- Label each folder as follows:
- Job Income
- Bank Statements
- Credit Report
- Credit Cards
- Other Expenses
- Other Income
- Other Assets
- Tax Returns
Next, order a free copy of your credit report on-line at www.annualcreditreport.com
Take a close look at every detail, and write down anything that is incorrect, such as an address, place of employment, or credit history. Correcting errors can take a long time, so you can be way ahead of the game by following through with the credit agency to correct errors immediately.
Each month, print out copies of your paystubs, checking and savings account statements. Place details about your car loans, student loans, or credit cards in the respective folders, even if your payments are made electronically. Place sufficient information about items such as auto or health insurance, cable TV, phone bills. If you don’t have a credit score, or have limited credit history or some past issues, showing proof that you paid these other bills timely will help boost your credit profile.
Every few months, open up your “house box” and write up a brief summary of your earnings and spending on a monthly basis. If your rent and the combined total of your loan and credit card payments are less than half your “gross” monthly pay, you are a good candidate for a mortgage.
Talk to some lenders, and get quotes from several different companies. When you’re ready to start looking, consider obtaining a letter of “pre-approval,” from your top choice lender. You can begin your house-hunting journey with the peace of mind that you kept your resolution, organized your paperwork, and qualify for a great mortgage program.