Romance & Money
Buying Your First Home
Planning your first joint tax season; strategy for buying a home
Jake in Portland, Maine:
"We were married last summer. Now it's tax time, and I'm not sure how to get
ready for taxes this year. Should we file jointly or separately? We also want to
buy a house, and I'm not sure how to start preparing for that. Where do we
start?"
Dear Jake,
That is an excellent, short, two-part question with a very long answer. In
regard to your filing status: only a qualified accountant should answer that for
you. The best way to find a good accountant is through a personal referral. A
great step in educating yourself about your new tax status is by visiting the
www.IRS.com website and reading through all the free information they offer.
Remember what Sir Francis Bacon (1561 - 1626) said: Knowledge is power.
In regard to the second part of your question there are many things you can
start to do today in preparation for your first home purchase. Here are the
first five steps you should take:
1.) Order your joint credit report from an on-line source such as
www.creditreport.com, or
individually from each credit bureau repository:
-
Transunion 1-800-888-4213
www.transunion.com
-
Equifax 1-800-685-1111
www.equifax.com
-
Experian 1-888-397-3742
www.experian.com
These are automated information lines and will prompt you through the process of
ordering a copy of your report. There is generally a charge of $5-$20 for a
copy. These websites offer a great deal of education as well. Take some time to
peruse the many options for education on credit reporting and credit scoring.
Order your credit scores, these are becoming increasingly important in the quest
for low mortgage rates. Knowledge is power. Before you start shopping for a
mortgage, know what your credit looks like and what your score is.
One warning: if you or your spouse has current or past credit problems, don't
combine your credit reports into a joint report until those problems are worked
out and the credit report reflects the resolution. In some cases this can take
as little as a few days; in other cases as long as many years. Obviously, it
depends on the problem. There is a huge difference between having one 30 day
late penalty, a $50.00 collection bill, a $500,000.00 IRS lien, or 10 years of
back child support.
2.) Start saving your bank statements, pay-stubs, 401k, stock account, and any
financial statements you receive. You will need a minimum of 2-3 months worth
when you make formal loan application. If you are receiving gift funds from a
relative, you must provide documentation regarding the source of the gift. Be
prepared.
3) Take a first-time homebuyer's education class. These are offered by
Fannie-Mae and by large, reputable banks in your area. Generally, you can find
classes listed in your local Sunday newspaper (real estate section) or at
www.fanniemae.com. Or order the Fannie-Mae free information booklet and begin
reading and educating yourself and your spouse about the home-buying process.
Education will empower you and will alleviate much stress associated with buying
a home.
4.) Contact a loan officer at your bank or through the referral of a friend. Ask
him/her to pre-qualify you over the phone. When you make this call, have notes
about your income and monthly expenses (total car, credit cards, student loans,
etc.) in front of you. You will not need to know your total for your current
utilities and rent, as the plan is to leave them behind when you purchase a new
home.
Based on this pre-qualification, you may or may not be able to move forward with
your desire to buy a house now. If the loan officer tells you that you qualify
based on your credit, income, source of down payment, and closing cost, then you
may move ahead to the next step: formal loan approval.
If you are comfortable with the loan officer, set an appointment and make
application for a mortgage BEFORE you start shopping for a house. It's
unfortunate when people find their dream home and then make loan application,
only to learn they do not qualify. Do your homework and be prepared. As a
pre-approved buyer, your offer on a house will be taken much more seriously than
one from an unqualified buyer.
If you are not certain about the loan officer, call around until you find
someone you are comfortable working with. He/she will give you a pre-approved
certificate that you will provide to the realtor you choose.
5.) Always get a good faith estimate of closing cost in writing when you make
loan application. Know up front what the loan and closing cost will be. Learning
costs at closing is too late and can be an expensive surprise. You may want to
compare the good faith estimate at two other lending institutions to make sure
you are getting a fair deal.
Keep in mind that this is a journey, so prepare properly as you would for any
trip. Your credit report is like a map. It will tell you if you can go forward
right now or not.
Also, be prepared by saving your information for loan documentation, and educate
yourself about where you are going. Choose your traveling companions well! I
cannot stress that enough. This process is stressful, and the relationships you
have with them can last from a few weeks to several months. As a couple, stay in
control of the process, and make good choices together. If you don't, this
process can take a serious toll on your romance.
Remember why you're buying a house in the first place; it may be your first home
together, your first garden, first dog, or whatever makes your heart sing. Will
it be the home where you raise your children? Or where your child may be born?
Remember that part of the anxiety you will be feeling is not just stress, but
also excitement. Remember the romantic reasons behind the money decisions.
Additional information on this topic:
Read Earlier Articles
Editorial Calendar &
Monthly Budget Worksheet
Important Financial Help
Websites and Phone Numbers
mindy@overcoffeenotary.com |
