potential home buyers envision the process of buying a home
as a simple one: Talk to a real estate agent, make a loan application,
find a house, sign a contract and wait for closing.
This is just the tip of the iceburg, as most experienced
buyers will tell you. These steps are critical to the process,
but there are many more which must be taken before you take
residence in the home of your dreams.
A REALTORģ can guide you through this complicated process,
making sure you donít stumble on any one step. You can help
your own cause as well by doing your homework in preparation
for what could be the largest purchase of your lifetime. Here
are some issues that if addressed could greatly expedite your
Check Your Credit
Even if you're sure you have excellent credit, it's wise
to double-check at the outset. You can easily do this by ordering
a copy of your credit report right online. Straightening
out any errors or disputed items now will avoid troublesome
holdups down the road when youíre waiting for mortgage approval.
You may see disputed items, in addition to errors caused
by a faulty social security number, a name similar to yours,
or a court ordered judgment you paid off that hasn't been
cleared from the public records. If such items appear, write
a letter to the appropriate credit bureau. Credit bureaus
are required to help you straighten things out in a reasonable
time (usually 30 days).
TIP: Make sure that any outdated derogatory entries are
deleted from your credit file. Adverse credit information
is not supposed to be reported or included on your credit
report after seven years (except bankruptcy information, which
can be reported up to ten years).
TIP: Officially cancel inactive credit cards.
If you have an inactive credit card with a $5,000 limit, even
though you owe nothing on it, some mortgage lenders will consider
that a potential future debt. Too many inactive credit cards
with significant credit limits could keep you from obtaining
a mortgage loan. Don't just cut up your extra cards; officially
cancel them, and do it now so there will be time for the news
to reach the credit bureaus.
off on making any major credit card or car purchases while
you're waiting to apply for a mortgage. Monthly payments
you're obligated to pay will be counted against you, and reduce
the amount of the mortgage loan you'll be offered. Even if
you've been pre-approved for a mortgage, that approval is
subject to last-minute evaluation of your financial situation,
and a spending spree for appliances, furniture and other goodies
intended for your new home may wreck your chances for buying
& Pre-approval on a Mortgage
Any reputable real estate broker will "pre-qualify"
you for a mortgage before you start house-hunting. This process
includes analyzing your income, assets and present debt to
estimate what you may be able to afford on a house purchase.
Mortgage brokers, or a lender's own mortgage counselors can
also calculate the same sort of informal estimate for you.
Obtaining mortgage "pre-approval" is another
thing entirely. It means that you have in hand a lender's
written commitment to put together a loan for you (subject
only to the particular house you want to buy passing the lender's
Pre-approval makes you a strong buyer, welcomed by sellers.
With most other purchasers, sellers must tie the house up
on a contract while waiting to see if the would-be buyer can
really obtain financing.
The down side is that you must pay application fees to cover
the lender's paperwork in verifying your employment, income,
assets, debts and credit rating. If you later decide not to
use that particular lender, you'd have to start all over again
elsewhere - with no rebate.
Pre-approval will also speed up the entire mortgage procedure
once you've found the house you want. The only remaining
question will be whether the house will "appraise"
for enough to warrant the loan.
an Educated Buyer: Research Neighborhoods, Read Ads and Visit
If you were changing cities, the standard advice used
to be to subscribe to the local newspaper in the new town
and start reading local news and classified ads to
get a feeling for different neighborhoods. Although thatís
still a good idea, you can simplify and streamline the house-hunting
process by using the Internet.
For local moves, you have the advantage of driving around
neighborhoods that interest you and looking at lawn signs.
Particularly on weekends, you will see "Open House"
postings. Don't hesitate to walk in, even if you're not ready
to buy yet. Visiting open houses is an excellent way to familiarize
yourself with the market and judge various real estate agents
you may meet along the way, and it won't put you under obligation
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Your Wants and Needs
Making sure you end up with the right home involves
figuring out exactly what features you need, want and
don't want in a home. Before starting your search,
you should make a list to decide which features are absolutely
essential, which are nice "extras" if you happen
to find them, and which are completely undesirable.
The more specific you can be about what you're
looking for from the outset, the more effective your home
search will be. Also...keep in mind, that in the end, every
home purchase is a compromise.
Create your own personalized list and when you're
finished, print it, fill it out and take it with you to your
real estate agent.