First-Time Homebuyer Hacks

The guide in brief

First-time homebuyers: the guide in brief

Here is a plain summary of the main points in First-Time Homebuyer Hacks. The full guide goes further, with a checklist of moves to make before you apply and the questions to bring to any lender.

What the lender actually reads

Most first-time buyers expect the decision to turn on their salary. It mostly turns on three things: how steady your income is, not just how large it is; what you already owe each month, because that sets what is left over for a house payment; and whether you can document all of it cleanly, which is where many files get stuck. What is not on the list is perfection. A lender needs an honest file, not a flawless one.

A computer reads your file first

On a typical loan, the first reader is not a person. The file goes through an automated underwriting system, and what comes back is not a simple yes or no. It is a list of conditions: the documents and explanations the loan still needs. An underwriter then checks your papers against that list and the program rules. Most of underwriting is simply working through it, one item at a time.

Conditions set the pace

Files rarely stall on the big decision. They stall when nobody answers the next item on the list. The buyers who move fastest are not always the ones with the most money; they are the ones who send each item the day it is asked for, and who ask straight away when a request is unclear.

What to gather before you apply

Having these ready at the start saves weeks of back and forth:

• your recent W-2 forms, or your tax returns if you are self-employed;
• your most recent pay stubs;
• recent statements for every bank or investment account you will use;
• photo identification and your recent address history;
• a short note explaining any large or unusual deposit;
• a simple list of what you owe each month.

The quiet mistakes, and the moves that help

A few habits sink more first-time files than a modest income does: opening new credit or financing a car in the middle of the process, a large deposit with no paper trail, changing jobs or moving from salary to commission just before applying, co-signing someone else’s loan, and moving money between accounts until the trail is hard to follow.

The moves that help are just as plain. Talk to a lender early, months ahead if you can, so small problems get fixed while there is still time. Pay every bill on time and leave your credit cards alone, neither opening nor closing any. Keep your down payment money in one account and leave it there. Write down where any deposit other than a paycheck came from, when it happens. Hold off on big purchases on credit until after closing.

Questions to ask any lender

The answers show quickly whether a lender will guide you or simply process you. Ask what would make your file stronger and what would weaken it; which conditions to expect and how to clear them quickly; whether you are getting a quick estimate or a fully reviewed file; and what most often surprises first-time buyers in your situation.

To see which programs suit first-time buyers, including options with a smaller down payment, read our pages on buying a home, FHA loans and down payment assistance, or try the mortgage payment calculator with your own figures.