GET YOUR FINANCIAL HOUSE IN ORDER - Before you start shopping for your dream home, you need to start with a little financial housekeeping and homework. Before you even apply for loan approval you should know exactly where you stand.
Your credit report and score play an important role in the mortgage approval process. For this reason, you need to know what information has been made part of your credit reports. You can obtain your credit reports for free one time per year at www.annualcreditreport.com. For a reasonable fee you can also obtain your credit score. Lenders also use this score in making decisions regarding loans.
Under the Fair Credit Reporting Act, you have a right to dispute incorrect information. You can work with the credit reporting agencies to have the information corrected or even removed from your credit file.
If you think you need to clean up credit issues - READ THIS FIRST!!!
FIND OUT HOW MUCH HOUSE YOU CAN AFFORD - If you are working with a Real Estate Professional, they should be able to give you a ballpark estimate of how much you can afford.
However, the quick qualifiers that agents do are not a commitment for loan approval, they merely calculate a rough estimate of how much mortgage you can afford. If you meet with a lender, they can qualify you and give you a pre-approval letter. When you find the house you want, you will submit a copy of this letter along with your offer. Sellers are much more comfortable accepting offers where the buyer has taken steps to arrange a commitment for financing in advance. Good Agents will have established relationships with reputable lenders. But be careful and suspicious of agents who claim to be able qualify you EVEN WITH BAD CREDIT. There is a whole industry set up to prey upon "less-than-perfect" borrowers.
DETERMINE YOUR WANTS AND NEEDS- You will need to make some decisions about the house you want to buy. Do you WANT a house with a fireplace? Do you NEED a house with an extra bathroom or bedroom? It may be helpful to write these down in advance. Make lists of things you might want and things you definately need in your new home. When you finish that list, make another of things you absolutely do not want. This will help narrow the field and make your home search easier.
DECIDE WHERE YOU WANT TO LIVE - Consider commuting time, access to freeways, public transportation, schools, parks and recreation facilities. When making these decisions. Eye the location of your future home with a savvy investor's mind. Think about locations that add value to the property and would be attractive to future buyers should you decide to sell.
WORK WITH A BUYER'S AGENT - We would always recommend that you work with an agent. The seller has an agent representing them and protecting their interests. As a buyer you should have the same protection and representation. Real Estate transactions are very complex and not something that should be tackled by the do-it-your-selfer. If you decide to hire an agent, choose someone you are comfortable with. You should expect to sign a buyer's broker agreement. A good agent will help you find properties, discuss pros and cons, and will obtain additional information for you to assist you in making your choice.
TIME TO SHOP- Pick up House for Sale magazines, check classified ads in your local papers, surf the net. These are all good ways to see what is available. Your Buyer's Agent will also have information on listings for you to review.
MAKE YOUR OFFER - Your agent will help you decide how much you should offer. They will also discuss earnest money, contigencies, and other details that will be included in a purchase agreement. Your offer will be presented to the seller and if accepted, will result in a binding contract to sell the home to you!
INSPECTIONS - Even though sellers are required to disclose problems that they are aware of, there are some cases where problems exist but are hidden or not obvious. Home inspections are in the buyer's best interest because they can reveal problems with the structure or systems of a home before a final buying decision is made. This is an expense you will need to pay as part of your home buying process. You should plan for about $350.00 for this inspection.
If an inspection reveals problems, they can be addressed and dealt with upfront and the cost of needed repairs can be negotiated with the seller. Or, you can walk away from the deal! The cost of a home inspection is cheap insurance against serious repair bills down the road!
HOMEOWNERS' INSURANCE - Your lender will require you to insure your home against loss and/or damage. You should plan to get an insurance policy for your new home before closing. If you have an auto policy, you may be able to purchase a Homeowner's policy through the same company at a discount. You can expect to pay about $4.00 per one-thousand dollars of the purchase price for your annual premium. You will need one-year paid in advance to get your insurance started.
CLOSING- The last step is "the closing". This where the buyer and the seller sign all the legal paperwork to transfer ownership of the home. This also when the downpayment and all remaining fees are to be paid. Once all the paperwork is completed, you get the keys to your new home! |
