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Before You Buy

By Norma Toering Broker for Palos Verdes and Beach Cities

Real Estate Broker/Owner with Charlemagne International Properties BRE# 01147470

November 15, 2008 04:59 AM

Your down payment of 20% is in the bank for that million-dollar home you want to buy in Palos Verdes. Congratulations, but there is still work to be done before you start shopping:

Know the Score: If you're not already familiar with your credit score, find out what your number is. If it's below 700 spend a few months pumping it upward. If necessary, there are professionals who can help you clean it up.

They've Got Your Number: One of the first things a lender will do when you apply for a loan is run your credit score. That's why you know what it is and have taken the steps to send it skyward.

Low is Better than High: Credit card balances are best kept on the low side in the months before you plan to purchase a home. Running a high balance will impact your credit score and your ability to secure a home loan.

Wait for New Wheels: Monthly installment payments impact your credit score, so postpone adding a new car (or other major purchase) in the months before you plan to buy a home.

Show Me the Money: In addition to the down payment, you'll need at least three months of living expenses tucked away--maybe more.

Keep the Job You Have: The months before a move is not the time to change jobs. Banks are looking for some stability and recent job-hopping makes them a little jittery.

Two Homes Equal Two Payments: It takes a truckload of cash to carry two homes for an indefinite period of time. The banks do not want to take back your home; they already have enough real estate on their books from past mistakes. More than likely, they'll give you the soft rejection, by asking you to come back when you have more cash or have sold your current house.

My advice is to sell the first one before you buy the next one. You may have to rent until your dream home comes on the market, but straddling two homes can be a very uncomfortable and expensive experience. Not to mention cause for many a sleepless night. Make life a little easier on your nerves. Sell first, and sleep well.