to produce many documents, beginning with tax returns from at least two years before. Lenders will also want to see monthly bank statements, as well as proof of your income and all debts you may have. It’s also a good idea to have sources for any big ongoing deposits you may have. If you have family making a down payment for you, it is important to have a written “gift letter” to document such information for your lender. Otherwise, the amount will be considered a mortgage and included in your financial analysis. You will need money for the down payment, closing costs, at least a year’s worth of taxes, and insurance payments. It is also recommended that you have extra cash because mortgage lenders will want to ensure that you have an adequate reserve. This is in case something in the home breaks and needs to be replaced, or if you lose your job and need money to make payments while you look for new employment. Multiple financial experts have agreed the general rule of thumb for a down payment is around 20%, but you are able to do it with as little as 5%. Keep in mind that if you are paying less on the down payment, you will be paying more monthly. This also includes the private mortgage insurance you will need to pay, which is known as the mortgage insurance premium. The mortgage insurance premium only applies, however, if your down payment is less than 20%. One thing you should keep in mind is that improving your credit score will not happen overnight. It could take quite some time. It is essential that you begin keeping your credit score in check the moment you start thinking of buying your home. By keeping your credit score at a good level, you will not have to worry about paying extra interest on your house.
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