The hows, whys about buying a first home
- B.J. Yoder: Young Money
- September 19, 2021
- 978
Right now we are in a seller’s market, which is great for people who already own a home, but it’s not great for young people who are searching for their first home.
I remember when I was looking for a house, I finally found one, and the real-estate agent told me there were already three offers on it, and that was day one. So I put my offer in at $2,000 above asking price, and I thought that was absolutely nuts, but I got the house. Looking back, it was the right decision.
In this fast-paced buying market where homes are gone the same day they are listed, you must be ready at all times to buy one, and I want to help. In this article I want to list the how and the why on buying a first home, starting with what is needed.
There is a lot of stress in getting a loan, so make it as easy on yourself as possible. One way is to use a local bank or credit union — the people who see you as a person and treat you as a person, not a number. If you have a friend or even acquaintance that works at a bank, go there first. It’s not awkward (at least to me) to have a friend professionally take a look at what you’re making income wise.
These local banks are willing to work with you, maybe cut you a little slack and work harder to get a loan. From my experience, they are willing to roll with the punches and try to help you in as many areas of the loan as possible. The same cannot be said for the larger, national banks.
Bankers and loan officers need to see you are a reliable lender and that you will make your payments, and that’s why so much groundwork needs to be done before the approval can be captured.
The first will be your last two W2s. This shows your income produced and what you have made and are making. It is a quick summary of your earnings. If you are doing activities “off the book,” things like selling items on eBay, working for money under the table or a nontaxed side hustle, then the bank will not accept that. They are only looking for taxed income to count toward this.
Next will be bank statements showing how much money you have in the bank. It will be a big red flag if you’re looking to buy a $200,000 house and have nothing saved, meaning the risk the bankers run by lending you the money will be greater because there will be less equity (from the down payment) they are giving the loan on.
Even though the W2s are already provided, a full tax return might be asked of. This paints the full picture of your financial past, from investments, to earnings, to other incomes. Have these ready to go because I remember I needed them the first time, and I was digging through piles of papers and wasted too much time looking for them.
Your last two pay checks also might be handy to have because the W2s and tax returns could almost be a year old, but these pay checks bring everything up to date.
Of course, everyone’s situation is different. You may own your own business, so you wouldn’t receive a W2 from your boss, or you make your money from investing, so you would show the money made from that. There are endless combinations of ways people make money but treat this meeting as a job interview.
Holmes County native BJ Yoder is an insurance agent by day and a finance enthusiast by night. This column is for informational purposes only. He can be emailed at benjamin.john.yoder@gmail.com.