Before you start shopping for your property, it is a good idea to make some preparations.
Build Your Green File.
A green file contains all your important financial documents. You will need it to secure financing for your property. The typical green file should contain:
- Financial statements
- Bank accounts
- Credit cards
- Auto loans
- Recent pay stubs
- Tax returns for two years
- Copies of leases for investment properties
- 401K statements, life insurance, stocks, bonds, and mutual account information.
Getting pre-approve for a mortgage means just that – knowing in advance, before you even begin your house hunting, exactly how much you qualify for in mortgage financing. This is a critical step. Too many buyers begin shopping without pre-approval and end up heartbroken; they lose out on a home they loved, and maybe even made an offer on, because they didn’t qualify for adequate financing.
Avoid this mistake by making pre-approval one of your first steps. Once you’ve completed your financial health check and put together your green file, you should begin to look for a lender. You may choose to go to the bank that they do most of their business with, while others choose to ask for a referral from their Realtor’s sphere of influence. Both of these options have separate pros and cons and should be evaluated accordingly.
Be smart with your finances
It’s important to be honest with yourself when you do your own financial review. If you underestimated your household expenses to make your financial picture look brighter than it actually is, your mortgage representative will probably expose a more realistic view.
It is also important to be careful with your finances. Now is not a good time to make sudden career changes or large purchases. You want to approach your property purchase from a position of financial stability.