Purchasing your very first home

Purchasing your first home is an exciting and sometimes overwhelming experience. The more you can prepare yourself to be a future homeowner, the easier the process becomes. Being preapproved by a reputable lender is the best first step. Due to the amount of homes on the market, and the amazingly low rates, the real-estate market has seen an upswing in sales. In recent months, real-estate agents and sellers prefer to show homes to buyers whom they know are pre-approved and qualified to make an offer.

Be sure to research your lender. The lender will be one of your most important resources and guides throughout the process. When you call a bank, credit union or mortgage company, be sure to ask about its pre-approval process. Your best choice is to select a lender that requires a full application and collects complete asset-and-income documentation. This allows the lender to know exactly what you can afford and how best to structure your loan.

Lenders look for borrowers who have a strong work history, generally with at least two years in their trade. This is especially important for borrowers who have sales commissions or bonus-based income. Work history demonstrates stability and the ability to repay obligations.

Cash balances in the form of checking, savings and money-market accounts are another important factor in home buying. While self-saved funds are not required in all types of programs, they contribute to the strength of a loan. Cash is needed toward a down payment, closing costs and reserves. Reserves should consist of the equivalent of two to three months of mortgage payments in a checking or savings account. Other assets, such as stocks, bonds or mutual funds, can be liquidated and used toward a down payment or as reserves.

Your credit score and the amount of your current loans and credit cards are another important piece of the qualification puzzle. Typically, having three credit facilities open for at least 12 months is a minimum standard among most lenders. The type of credit can be any combination of revolving (credit cards) or installment debt (car loans, student loans, secured loans). Timely and consistent payment is the key to a good score.

There are many programs available to first-time homebuyers, some with as little as a 3 percent down payment based on credit score and income. There are also programs available with and without private mortgage insurance. Make sure your lender explains all of the available choices to you and helps you choose the best program to fit your circumstances.

Remember the best homebuyer is an educated one. Many first-time homebuyer programs require mandatory counseling. Whether it is required or not by your lender, it is an enriching experience and a great information source for those looking to purchase. Local organizations such as Merrimack Valley Housing Partnership offer classes monthly in English, Spanish and Khmer.

Most importantly, remember to have fun and enjoy the process of buying your home. It is definitely one of the most important steps in a person's life. The memories created in your home will last a lifetime, so may your journey getting there be a wonderful one.

Elena Kalogeropoulos is a mortgage lending specialist at Enterprise Bank in Lowell. She can be reached at 978-656-5745 or via e-mail at elena.kalogeropoulos@ebtc.com.

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