ARE YOU READY TO BUY A HOME? How do you know if you are ready to buy a home? It is a great market for buying a home, interest rates are the lowest ever, there are so many homes on the market to choose from, in many ways timing could not be better.
Along with all these pluses in the current market, it is also a more difficult time to buy a home because there are fewer loan programs, underwriting guidelines are stricter and let's face it, many of the homes you can buy are perhaps not in the best shape.
I can't tell you everything you need to know in this post about how you know you are ready to buy a home, but I can hit one very important high spot:
YOU NEED VERY GOOD CREDIT TO BUY A HOME. Even though some programs will go somewhat lower when looking at credit score, your good credit is a ticket to a smoother process overall. How do you know about your credit? Take a look at it yourself before you get too excited. Go to WWW.ANNUALCREDITREPORT.COM.
You can get one free copy per year of your credit report from all three bureaus. You will not get a score unless you pay for it. The actual reports are free, scores are at a cost. What you are looking for here, however, is the status of your credit, the score is not the most important thing. Examine it to see:
what trade lines you have open? You may need a minimum number of lines open for a real estate mortgage. You'll need to ask the lender about this specifically.
how long have they been open? Your lender may require several months of history.
are you paying on time? Important factor. If you are not, then why not?
how much of the available credit are you using? Very important to the lender, if you are using over 50% of the available credit you will score lower than someone who is using less than 25% of the available line.
are there things on your credit you did not know you had? If so, you will want to make note of them to discuss with the lender. There are some situations where if you have a collection you were not aware of, you may want to discuss it with the lender prior to settling it. Any changes to an account like this affects your score, including paying it off.
Armed with this information and your employment information, you are ready to call a lender to get educated about the financing process of buying a home. You do not want to look at homes until you know you are ready to buy a home. To do so is frustrating to you, sellers who get their homes ready for a showing and the Realtor who may spend time with you when you are not ready.
Lenders want to see that you are handling your current credit situation responsibly. You can take that first step to determine if you are ready to buy a home by pulling a copy of your credit. I usually suggest the above website whether you are getting ready to buy a home, whether you are renting or already a home owner. Get a copy of your credit, it is FREE.
Another good tip for using the above website is to pull only one bureau at a time. The three bureaus (Trans Union, Equifax and Experian) generally have the same data. You could, however, have a lender who reports to only one or two of the three so there can be some difference. You can look at your credit three times a year for FREE by looking at one in January, wait a few months and look at a second bureau and after a few months look at the third one. A good way to keep track of your credit on an ongoing basis and it costs you nothing even if you are not in the market to buy a home.
Do you want to buy a home? Get ready first!
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