How to buy a house

By
Real Estate Broker/Owner with Fierce Realty Corp RM424134

If a buyer is interested in buying a home, they should start the process 6-9 months before the purchase. It should begin with checking their credit. If any issues are found, they can work on that immediately. However, it takes several credit cycles (every 30 days) for the credit report to update. Credit is one of the 3 C's (credit, capacity, collateral) needed with buying a home and it is very important. Having a good to excellent credit score will determine how much you will pay to borrow money-essentially your interest rate. 

When reviewing their credit reports, they should be looking for errors, judgments, and late payments. They can correct errors by contacting the credit reporting agencies to dispute them. If they have judgments, they can contact the creditor to decide to settle the account as well as late payments. Some creditors are willing, if you are currently up to date,  to remove late payment history. It's very important to do any disputes 9-12 months before applying for a mortgage. It takes time for credit reporting agencies to remove them.

Within 3-6 months before a buyer begins the pre-approval process for a mortgage, they should keep in the mind the following:

1. Always pay on time.

2. Keep your credit owed within limits. (less than 30% of total available credit)

3.  Use two credit cards if you are a definite credit card spender. If you have two credit cards, you can keep your usage percentage in control.

4. Pay high-interest loans and small loans first. 

5.. Negotiate if you cannot pay on time. 

At the same time buyers should stop adding on anymore debt. If you want to borrow money, you cannot owe several other creditors  money.

Within 2-3 months buyer's should get organized, Here is a generic checklist of documents that they should put together ahead of time.

1. Two forms of identification including a government photo ID.

2. Pay stubs for the past 30 days including year-to-date income.

3. Your most recent year's W2 form and/or most recent 1099 form.

4. Two years of your most recent signed tax return, including all schedules and all pages.

5. All pages of your most recent bank statements, including back up docs for all large deposits.

6. Gift letter if gift money is to be used.

7. All pages of any court order child support or divorce decree.

There is nothing better than working with buyers who are prepared, ready, and organized to begin the process. Hopefully, this post will help streamline the process for your buyers and make for a smooth transaction for everyone else involved.

Comments (4)

Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH
CRS

Great piece of advice!

There is nothing better than working with buyers who are prepared, ready, and organized to begin the process & help streamline the process for your buyers and make for a smooth transaction for everyone else involved

Mar 13, 2019 03:49 AM
Deborah Ann Spence

Yes indeed.

Mar 13, 2019 04:30 AM
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

Buying  a house should be a methodical journey.  Making sure tha the credit is watched very very carefully

Mar 13, 2019 05:08 AM
Deborah Ann Spence

Most new potential homebuyers are not aware of what can help or hurt credit.

Mar 13, 2019 05:38 AM
Michele Cadogan 917-861-9166
Fillmore Real Estate 2990 Av U, Bklyn , NY 11229 - Brooklyn, NY
Licensed Real Estate Associate Broker -

Good points to share in helping first time home buyers prepare to buy a home. Not taking on any additional debt is most important.  

Mar 13, 2019 01:12 PM
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
The right Charlotte REALTOR!

I had a client who closed a credit card two weeks from closing and when her credit was pulled again it was noted as a red flag on her report. She lost the house. 

Mar 13, 2019 03:06 PM

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