What you need to buy a home

What you need to buy a home

Things you need to do before you start shopping for a home

 

Here's what you need to do, and when, if you are thinking of buying a home.  The home buying process can be daunting for the first-timer because buying a home can involve many complicated processes.

Here is a timeline starting one year before you hope to start seriously shopping for a home. This will give you time to arrange your finances and buy a home in less time, with far less stress.

A year before (or as soon as possible)

 

Request your credit reports. Errors on your reports can force you to pay a higher interest rate and can destroy your chances of getting a home loan. You can get a copy of your reports from the three major credit bureaus — Equifax, Experian and TransUnion at Annual Credit Report  Look for accounts that aren't yours, collection accounts for debts you don't owe and negative marks (other than bankruptcy) that are older than seven years.

 

Your FICO credit scores

Your credit scores, which are three-digit numbers used to measure your creditworthiness, help determine the rates and terms you can get for a home loan. There are several credit-scoring methods, but the one used by the vast majority of mortgage lenders is the FICO. 

 

Consider a credit Repair/monitoring service

 

Normally, I think these are unnecessary for people who have only minor credit blemishes or not at a high risk of identity theft. However, because of how important your credit and credit scores will be in buying a home; you may need the help of an experience government approved credit repair agency. 

 

Start Saving

In today's real estate market, it is recommended that you have at least a 5% down payment; if you can save up 10%, you'll have even more financing options. You will also need to have mortgage, tax and insurance for 3 months.

6 months before

Start Looking at Mortgage

It is important that you understand the kind of mortgage that you are getting. You need to understand the risks of the different types of mortgages and to select the right one for your family. My advice is to select a traditional, fixed-rate mortgage.

 

Research all the costs of owning a home

 You are excited about the great mortgage rate you’ll get; but wait! Remember that the mortgage is just the start. You'll have to pay property taxes and insurance on the home. There may be homeowners- or condo-association fees as well and you maybe face higher utility bills, include water and sewer bills.  There will be the cost of maintenance and repair as well. Consider purchasing or negotiate a Home Warranty, to assist with any unexpected repairs.  

 

3 months before

Reduce your credit utilization. The FICO scoring formula is sensitive to your debt to ratio; therefore, limit your credit card usage and monitor your revolving lines of credit. Try to keep that balance below 30%, or even lower. Try making payment before the statement's closing date to reduce the balance reported to the bureaus.

Don't apply, open or close any accounts. Avoid actions that could potentially harm your credit, such as applying, opening credit accounts or closing old ones. Try and defer any credit impacting activity until the mortgage process is completed and you've moved into your new home.

2 months before

Get approved for a mortgage. Pre-Approve vs. Pre-Qualify

Pre-approval- a lender gives a commitment to make you a loan                         

Pre-qualification- a lender gives you an idea of the size of the mortgage you might afford without making any commitments.

Having a pre-approval does give you an advantage during negotiation, especially if you are in a multi-offer situation.  Getting a pre-approval will involve giving your loan offer permission for a hard credit inquiry, but in my opinion, it is worth it because you'll be in a stronger position with sellers.

Begin researching neighborhoods and contact a Local Top Agent. Check Internet listings, attend open houses and find an experienced local top agent guide and help you refine what you're seeking.

 

Once you've found your home and your offer is accepted

Arrange for an appraisal, a home inspection and a walk-through. The appraisal is required for your loan to be approved. An inspection isn't necessarily required, but I strongly recommend it. A home inspector will alert you to serious problems before you purchase the home. The walk-through is normally done within 24 hours of the closing; this is to make sure that the sellers have made any agreed repairs and the home is in expected condition.

 

Get homeowners insurance.

 Mortgage lenders require prove of a home owner’s insurance coverage prior to closing. Shop for the best rate home insurance

Confirm amount you’ll need at closing. "Closing" is when you sign all the paperwork and you and your bank pay the seller the agreed-upon amounts. Your attorney or title company will provide you with a HUD 1 (itemize fees & closing costs), which can include your down payment and your share of legal fees, paperwork costs, property taxes and title insurance.

The home buying experience can be fun, if you are informed and prepared. Wherever you are in the home buying process, my advice is to speak to a Local Top Agent, who will guide and point you in the direction  to owning your first home.