Buying a Home The First Step: What To Do & What Not To Do

I've thought a lot about this topic lately. I've heard nightmare stories where at the closing table or a few days before the lender rejects the buyers and sends them back to their apartment or home. The buyers continue renting or living with family. Imagine that being rejected at the closing table! Now imagine living with family for another 6 months, a year or even longer. J What did they do wrong?

There are many things to consider when buying a home and at the forefront of this process is getting approved and then staying approved right through the closing and funding of the loan(s). Buying a home is probably the most important decision you'll ever make. It's not to be taken too lightly.

The first thing to do when you start to consider purchasing a home is to pull a copy of a credit report on all parties planning to purchase the home. You can obtain a copy of this credit report http://www.freecreditreport.com/ or https://www.annualcreditreport.com/cra/index.jsp or one of the many other sites available. When reviewing the report look for errors such as open accounts that are not really yours, or items that should have been closed but remain open. Look for past due accounts and review if they are truly past due or if this too was reported in error. These are just a few things that really impact your score. The higher your credit score the more likely you are to be eligible for several lending programs and at better interest rates.

Once you know your score the key thing to remember is to keep the same score if it's a high one 700+ or bring up the score if it's considered low or borderline low. Talking with a lender will help decide what needs to be done. A few things they recommend is to clear up any errors and obtain notices that they were cleared up from the merchant. ***Do not open new accounts, purchase new items of high value or obtain new loans such as on cars or against your current house. Do not default on your current obligations or make late payments against existing credit cards. Opening new accounts or making late payments will impact your credit score and could cause your loan to fall through, yes even after you were first approved. This has happened at the closing table when lenders have re-pulled credit reports.

Another important area is your debt to income ratio. Lenders look at your current debt and compare this with your current income. They factor in the new loan payments and determine if this ratio is too high for approving the new loan. One great thing to do is consolidate your debt whenever possible into a lower payment and with a lower interest rate. Another thing to do is to pay down all debt right until you apply for the loan. If you're thinking of changing jobs in an entirely different career or with a lower salary, you may want to reconsider doing so until the house is purchased and funded.

Just remember it's never too early to start the process. Often it can take months or even a few years to be prepared to purchase a new home. Work on the credit report, lowering the existing debt and please don't take on any new debt it will only cause you frustration when you go to apply for a mortgage. Remember it's more important to have a new home for you and/or your family than to have that fancy new car isn't it?

Let me know if you'd like to talk with a lender and I can provide you with a few names.