Plan Your Purchase up Front
When you are getting ready to buy a home, everything seems to happen quickly. Surprises arise, and they can catch you off guard. The easiest way to take the sting out of the process is to plan ahead. There is a lot you can do before you cruise the real estate section of the newspaper or contact a mortgage lender for pre-approval.Start by getting your documents in order; you are going to need them. You should dig out your tax returns for the past two years. If you do not have them, contact your tax preparer. Most will mail or fax you a copy right away, especially if you are not asking during tax season. Do you prepare your own taxes? Many people do. If you did not save a copy of your tax return, you can contact the IRS for copies. Keep in mind that it may take a few weeks for the IRS to get them to you. This is another good reason to plan ahead.
In addition to your tax returns, you will need your W-2 and pay statements for the past few months. Most employers do this electronically now, so you can go to the company intranet at any time and pull copies, print them and keep them for your records. If your company has not moved into the information age, start by talking to your Human Resources department. If they cannot help you out directly, they can still point you in the right direction.
For the self-employed, this step is a bit more complicated. You will need to collect your 1099 forms that have been issued to you by clients (if applicable), and you should prepare a profit and loss report. Make sure you have information, such as bank statements, to support your claims. The mortgage lender will not simply accept a report that you have prepared.
You should run your credit report before getting started as well. You are entitled to a free copy of your credit report every year from each of the three major credit reporting agencies: TransUnion, Equifax and Experian. This will give you an indication of your credit strength, and it will be an important factor in determining the mortgage interest rate you are given.
There can be other documents that you will need, too. Pull together your bank statements and balances from brokerage accounts. If you are divorced, you should have a copy of your divorce decree on hand. It’s better to have all your documents up front, especially if it could take you a few weeks to collect them. If you have everything you need when you start to look for a home, you won’t experience nearly as much stress down the road.
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