Perhaps you've been throwing around the idea of entering into the wonderful world of buying a home. Maybe you've even came across a house that not only tickled your fancy, but left that euphoric taste of bliss running through your bones. Either way, probably the most important thing you can do is to become educated. From there, there's one place to start... Behold, The Basics:
- Cash isn't necessarily King. If you are paying rent, pay it on time and do so by check. That's a documented housing history. Any applicable down payment you have has to be sourced from the banking institution with whom holds your depositories. Documentation is one of the important things lenders look for these days. So, if you are slinging crack in the alleys in your spare time, instead of putting that money in a jar beside your bed... put it in the bank. Of note, I don't endorse slinging crack. I just endorse documenting your rental history and funds that you have to come to the table with to close.
- Before even traveling down the road of tangibly looking to buy a home, know what your credit score is before making any decisions. In the current lending atmosphere, your credit score has never been more important. Here's a link to help you get a grasp on the importance of credit in borrowing money in general, let alone to buy a home.
- Don't be Mortgage Poor. Many times you are pre-approved for X amount of dollars because on paper, that is what the lender deems "affordable" in your world. There's one small problem with that, the lender doesn't live in your world... You Do! Sit down and go over your monthly expenses (utilities, credit cards, student loans, car payments, insurance, groceries, any vices you like to partake in, etc) and come to an understanding of what type of payment is comfortable for you. And don't forget to figure in the taxes, home owner's insurance, and PMI/MIP (if applicable) along the way. Your Mortgage Professional can help you with that. By the way, I'm a Mortgage Professional and enjoy helping:)
- A Tax Advisor can be your friend. While I realize that the words 'tax' and 'friend' are strange bedfellows in the same sentence, read on. A lot of you folks may have heard about the tax credit for home buyers and for those who haven't, remove the rock and continue reading. First-time home buyers (includes folks who have not owned a property for at least three years) qualify for a tax credit of up to $8,000 if purchasing a home before December 1st, 2009. As long as it's owner-occupied for at least three years, that credit does not have to repaid. If that doesn't give you enough incentive, all homeowners qualify for tax credits for various home energy efficiency improvements throughout 2009!
- Hire a Buyer's Agent. They represent you and you alone. It doesn't cost you a dime and you can be relatively certain that your best interests will be at the forefront of your Agent's heart. Buying a home doesn't have to be complex, a Buyer's Agent can make your life and the transaction so much easier.
- Get a Home Inspection. A lot of lenders don't require it (whereas they require an appraisal) but a Home Inspection could very well save you a bundle of money down the road. Imagine for a second you just bought a home and the boiler breaks down, the roof starts to leak, the electrical system takes a dump, etc... all could have been avoided with an initial Home Inspection. Consult your Buyer's Agent to see if getting a Home Inspection is the right thing to do for you.
- With the large amount of inventory on the market, you may find a lot of homes that need some work. The condition of some of these properties may be such that Conventional Financing of any sort is just not possible. No worries, though. A great product to utilize in these cases is the FHA 203(K) Loan.
- Once you are pre-approved and have a signed sales agreement, don't apply for any additional credit at all. While I'm aware that many folks want plush and extravagant furniture to accentuate the decor of their home, do not start buying anything on credit until after your loan closes. Applying for credit of any kind in the thralls of the transaction could adversely affect your credit scores, disrupt your debt ratio, and even flat-line the transaction all together.
- If you have questions, ask them. I don't care how mundane you think they are, ask. The only stupid question is silence when one is on the tip of your tongue.
There are many ways to save money when buying a home. You can look for the best interest rate, lowest fees, have your Cousin Al become a Loan Officer so you can get a Family Discount, etc. Yet, the one way you can save maybe the most money is to become as educated as you can going forward. Seek out quality education, don't count on it to always seek out you.
Jason Sardi
"Your Friendly Neighborhood" Mortgage Consultant
610-653-0317
jsardi@ihmci.com
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Great common sense things to think about Jason in the home buying game. I especially like the one about not being mortgage poor. Great loan officers assist people in that area looking at the ratios and cautioning them not to go down that path.