I applied for a home loan for the first time in Colorado the other day, and waiting to get pre-approved was making me so anxious because of how emotionally invested I am in the property. Thankfully, I make enough money and I’m able to work from home. I recognize how extremely lucky that makes me, and I’m over the moon excited. So I want to share with first time home buyers like me, that want to know if they’ll get approved.
Calculate What They’ll Calculate About You
- First make sure you’re in the market for a house you can afford a 15-20% downpayment on, and that the funds for that down payment are readily available; either in your savings account for a few months or in the market like an IRA or equivalent account.
- Check to see if your monthly gross income is enough according to their debt to income ratio formula. Your DTI ratio should be under 43%. This is a way for the lender to tell whether or not you will be able to afford your monthly payment on your loan.
- Make sure your credit is in good standing. Pay off any debts if you haven’t already that will effect your credit score. These credit scores are important to keep high so that the lender doesn’t need to question your ability to pay back their loan. If you’re just getting started with building credit the easy way is to apply for a credit card and use it for things you know can pay back, and pay it back quick. Another trick is to pay more than the monthly minimum payment. I’ll get into how the credit card game is best played in another article.
- The last thing to know about what they will want to know about you is your employment history, have you been with your job for at least 2 years? You’ll be better off if you have been. They asked me for my tax returns from 2019 and 2020 and my last 30 days of pay stubs. I imagine this is the only way they can find out if you make enough to pay your loan back. If your self-employed make sure you’ve been filing your taxes right so that it looks like you’re making money and not losing money. I know there’s tax benefits to claiming losses so you don’t pay a lot of taxes, but lenders aren’t going to be impressed.
The Universe is on Your Side
I wouldn’t have found the special house that I’ve always wanted if I haven’t whimsically went to Colorado looking for vacant land to build on. I drove out there with my brother and my business partner JJ to see some properties to potentially put some shipping container homes on and dig a well. It wasn’t until after looking at that land and determining how much hard cash that would drain from us that we even considered getting a mortgage for something else instead.
We we’re driving to the hotel after seeing this 8 acre property that was listed for $25,000, when we came to this realization it was just going to drain all of our on-hand cash. I went on Zillow to see what we could find in our price range, under $300,000 when I saw it; a listing for an Earthship on 1.5 acres of land. At first glance I wanted it, but it didn’t really hit me that it could be the house I apply for until the next day when we were 15 minutes away from the property. I’ll never forget that day, 01/21/21.
Once we arrived on the property it felt like everything in my life aligned. All my mistakes, heart breaks and luck led me to this epic day. I’m writing this article after having just submitted the offer on the property, and it’s not like I have it yet, so I don’t want to jinx it. However, it certainly feels like it’s mine already. Anyway, before we enter the house it’s like 35 degrees outside a little cold for a couple of California mice men. The realtor opens the door, we go inside, and it’s like a tropical environment.
It felt like stepping off the plane in Hawaii inside this Earthship.
If you don’t know what an Earthship is, here’s a website that has some information on them for you. The house had everything we wanted, a natural spring coming out of the tap, land for homesteading, a chicken coup, 5 giant rooms and it was on rural land so that building future projects wouldn’t be a met with crazy red tape. It needs some work, but for what they were asking for it, it was worth it.
After I was done walking through the house, I opened the back door and a deer was standing there a few feet in front of me just chewing on some vegetable from the garden staring in to my eyes as if saying, “You definitely belong here.”
My point of telling you all this is to say that you shouldn’t settle for less, your dream property in your price range is out there and you should start looking at the market now before you’re ready to buy to get an idea of what you want, and the prices homes cost. That way you can prepare your financial situation for the day it comes.
If you have any comments or questions, leave them below or reach out to me on Instagram @kyleknob or on Twitter @kylesshortcuts
