Steps to Buying a Home for the First Time Home Buyer.
If you’re watching this video, you are one step ahead. You are already thinking about doing some research and having some thoughts about possibly buying a house. So congratulations and welcome to my channel. I’m Mike Patel, and I’ll be giving you some tips or guidelines, maybe three of them. The first thing you should do towards purchasing a home, the American Dream, whether it’s two months away or whether you’re going to buy it two years away or three years away, So you’re doing the right thing by at least thinking about it and doing some research on it. So let’s talk about the three steps you can take to get started owning a home and starting the process. So if you are thinking about buying a house, the first thing you need to do is establish credit. If you don’t have a credit card, if you’re a first-time buyer, and you have no credit score at all, what we call a FICO score, then you may want to apply for a credit card and at least establish some kind of credit. Because, just like buying a car, assuming you’re not paying cash, you’re going to have monthly payments. And for them to approve your monthly payments, they’re going to check your credit score. same thing with the house. To purchase a home, you will almost certainly need to obtain a loan from a lender or a bank. And the first thing they are going to check or ask for is your FICO score. What is your credit score? What is your FICO score? And the way to get it, if you don’t have it, is to apply for a credit card, even if it has a $500 or $600 limit, and then charge things on it, maybe gas or food, and then pay it off every month. And just like that, you will have a credit score. Once you start building that credit score, get another credit card in a couple of months, then a third one, and then charge more and pay them off in time. So just like that, you will have a FICO score and a credit record that will be great. So if you’re a first-time buyer, that’s what you want to do. If you don’t have credit, if you’re a first-time buyer who couldn’t buy because you have some dings on your credit score and your FICO score because you missed some payments, had some unexpected bills and forgot to pay them, or forgot to pay another bill and couldn’t pay on time, that will affect your FICO score and your credit score. So, if you have a low FICO score and you’re behind on payments, whether it’s medical bills or other bills, talk to the company you owe the money to, and they’ll negotiate to pay you a lower amount. Of course, I’m not a lender, and I’m not a credit repair expert, but they will guide you. But that’s one step toward increasing your lower FICO score to a higher FICO score. And if you are one of those buyers who already has a good FICO score but are going to buy it with your spouse, siblings, uncle, or someone else who does not have a good FICO score, they will need to improve their FICO score. So you can end up buying with your partner in this case. And if you want to increase your FICO score, there are other things you can do to increase it. The higher your FICO score, the better your interest rate. Of course, that doesn’t work all the time. They look at the combination of your score, your debt ratio, and your down payment. However, I believe that the higher your FICO score, the better the terms you will receive. And like I said earlier, I’m not a lender. So I’m talking from the perspective of a first-time buyer—how to think and what the first thing to do is. If you talk to a lender and ask them what the first three things to do are to buy a house, they may have a different perspective. I’m looking at your desire and ambition to purchase a home. So the first thing to do is check your FICO score and establish your FICO score. By the way, if you’re coming here for the first time or if you’ve been watching my channel, I would really appreciate it if you could subscribe to my channel.I come up with videos almost every week, maybe twice a week, and I get information on real estate trends, tips, and updates. So if you can subscribe and even like and comment, I would really appreciate it. I’m Mike Patel in Beverly Hills, California. So the second thing to do in the process of buying a house is to establish an income. The banks or lenders will look at your income. That is very important. So to buy a house, the first thing they’re going to look at is your FICO score. The second factor is your income, which must be determined in order to determine how much house you can afford. And based on the down payment, you have to establish how much payment you can make. And the amount of payment you can make is determined by your earnings. Are you a self-employed buyer? Then your entire scenario switches to qualification. If you’re a 9-to-5 or W2-type employee, they’ll look at your salary and length of service. Banks would like to see at least two years’ worth of income. And if you had a gap in between jobs or a change of job, it doesn’t matter. They’re going to look at the continuity of your job and your income. So that’s what they will be looking for. And income is very important because if you want to establish a mortgage payment of, let’s say, $3,000 but you’re only making $5,000 a month, you are not going to get that loan because what we call your debt ratio is too high. Banks look at your total income and then at your total debt. If you buy a house, let’s say your payment is going to be $500 a month, then you have property taxes, car payments, and credit card payments. They look at your history, combine all of that, and then they give you a certain amount of threshold to pay. So at $5,000, they may only allow $2,000 a month in payments. So it all depends on your scenario, your income, your debts, and the down payment that you make. So income is very important. You need to show at least two years’ minimum income continuity. If you’re self-employed, the whole scenario changes. If you’re commissioned or if you work on a consulting basis, the whole scenario changes. It is best to speak with a lender to determine what you will require in that case. So the second step is to establish your income. So when you buy, the banks are going to be okay with it, and based on your income and your down payment, they’re going to give you a certain amount of loan that your payments will be on a monthly basis. So check that out. By the way, if you need a referral for a lender anywhere nationwide, I have a vast network of top realtors and top lenders and I can refer you to them at no additional cost and with no obligation. Just comment below and I’ll be glad to refer you to a lender or a realtor in your neighborhood. The third and very important process, or step towards buying a house, is to think about your assets. What are assets? If you’re going to buy a house, you’re going to have to put some money down, unless you’re a VA, where you can go in with 0% down. So when you are ready to buy a house, let’s say you’re going to buy a house in two years and you’re thinking about putting at least 10% down so you can lower your mortgage monthly payment, assuming you’re buying, let’s say, a $400,000 house. And if you put 10% down, you’re going to need approximately $40,000 plus closing costs. So if you don’t have the $40,000, how are you going to have that in the next six months or the next year? Or in two years, when you are ready to buy a house? Are you saving every month? Are you going to have a bonus check come in? Are you going to have a tax refund come in? For this reason, you need to prepare your assets, and by the way, on top of the down payment, you’re going to need a little bit more than your down payment. I’ll give you an example. Some of the lenders, depending on your terms and conditions, your FICO score, and your interest rate, may require reserves in your account. They may require three or six months’ worth of reserves in your account. You may have to pay property taxes six months in advance. There are closing costs like escrow and title in California. In some eastern states, you have attorney fees. All of that needs to be added to the down payment. Also, if you are moving from one state to another, or from one county to another, or if you’re renting and moving into a house, you’re going to have moving costs. You’re going to have to rent an AUHAUUL or a truck, furniture, move, etc. But you may want to buy some appliances. So the assets that you’re going to need include your down payment, your reserves, your closing costs, your moving costs, and of course, things you need to buy for the house. Maybe some appliances or beds for your kids, if you have kids, or something else; pots and pans; everything. So you do need to think about your assets, and this may be a good time to start preparing for it. Talk to a lender right now, even if you’re going to buy two years down the road. See how much you can afford based on your income, your FICO score, and your debts, like your car payments or any other payments. That way you can establish how much money you are anticipating and start saving for that. The good thing is that if you don’t have a lot of money and if you have access to gift money, maybe your family, friends, or uncle will want to give you gift money that may be allowed by a lender. So you don’t have to collect all of it if you’re going to get gift money. There are also loan programs out there. I just referred a buyer to down payment assistance programs. These are programs that some cities, some counties, and some states offer to the residents where they give you assistance and you can pay them back later on, or they reduce your mortgage payment upfront so your costs are lower upfront. So there are a lot of programs out there. So if you’re thinking, “Oh my gosh, how am I going to get these assets?” There’s a lot of assistance out there, not only from your family but also from some down payment assistance programs. They are out there. Sometimes they are there and then they’re gone, but then they come back to the city or the state of the county. So look for those. One caution is that if you do go with the down payment assistance programs, make sure you talk to a lender who specializes in those programs because they are complicated and an average lender who has never done those may not be able to do it. So talk to a specialist who specializes in those down payment assistance programs. and they’re out there. And there are also grant programs. So good luck to you.