Buying a Home
Ten Steps to Buying a Home
Buying a home can be overwhelming. So, to make the transition smooth it is good to have a plan. Here are 10 steps to buying a home.
- One of the first questions a lender will ask, “what is your credit score?” So, before you permit a lender to “pull your credit” you’ll want to do that yourself. You can do that through one of the three major credit reporting agencies: TransUnion, Equifax and Experian. The reports are used to calculate both your FICO score and your Vantage score. You can get it for free from all three of the agencies once a year. Check it for errors. If you find an error report it immediately so it can be corrected before you apply for a loan. Sometimes it could take weeks to fix and show the correction on the report. Sometimes it can be fixed fast. It all depends on the error. Either get this done first. The FICO score is used by lenders to determine your creditworthiness. Range 350-850. The Vantage score is the credit score you see on the consumer side credit checking websites. This can vary from FICO. The higher your credit score the lower the interest rate you qualify to get. A score of 720 or higher gets a better rate on conventional loans. That can vary from lender to lender. For FHA loans a credit score of 580 or higher is required. Factors that affect your score are: payment history. Don’t be late with your payments.; how much you own, dept to income ratio; length of credit history, it is you to have a year of good payment history; New credit, if you’re planning to buy a home do not go out and buy a new car, furniture, or anything like 90 days same as cash.
- How Much Can I afford. The lender that you choose can help you with this. A lender can pre-qualify you for a loan based on self-reported income and assets, along with a check of your credit that will not affect your credit score. But there are other online tools you can use. Zillow has tools like Buy Ability and Home Affordability calculator to get a general idea.
- Get pre-approved. Pre-approval shows that you are willing and able to buy a home. To get pre-approved, a lender will calculate your debt-to-income ratio and assess your overall financial health by reviewing your: All sources of your income, W2’s All your Assets, like bank statements and retirement accounts, Debts, including monthly expenses like student loans, credit cards and other mortgages, Records of bankruptcies and foreclosures, Current rent, child support payments, alimony payments and any down payment gifts, when you’re pre-approved, you’ll receive a pre-approval letter. Not only does it officially let you know how much you can borrow, but it can come in handy when submitting an offer. A pre-approval letter shows a seller you’re serious about buying their home.
- Get a Real Estate Agent. A real estate agent can help you find a home quickly. Also, a seasoned real estate agent will have market insights, help with making a good offer, negotiating price, contingencies and repairs.
- Start searching then touring homes. Meet with agent in their office they can quickly review 100’s of homes and narrow the search down to those that fit your real estate goals.
- Make the Offer. Your agent will be able to perform a comparable market analysis on the home and take into account the properties’ condition and any special circumstances to make an appropriate offer. The agent will be able to help you with the property disclosure, any contingencies, earnest money, closing company and closing date.
- Once under contract the agent can help recommend inspection companies and scheduling.
- Even though you got preapproved or pre-qualified for a loan doesn’t mean that you automatically get the loan. The mortgage application has to be filled out and approved. The appraisal is part of this process. The lender generally doesn’t give the clear to close until one day before closing.
- Homeowner Insurance. The buyer must secure homeowners insurance to go it to affect the day and day of closing. If you already own a home, ask your existing agent to help you open a new policy. If you don’t own a home, shop around for a policy that works best for you. Your lender may be able to help you coordinate a policy that can be paid through your monthly escrow account.
- Get ready to Move and Close. Buyer will want to do a final walk through about one day before closing. The closing could take up to 1-2 hours, depending on the paperwork required. Once the signing is complete and the sale is recorded, you’ll receive your keys. You can now set up utilities for the new home — things like electric, cable and internet. If you’re buying a condo with an HOA that covers some utility costs, double check contract responsibilities with your real estate agent.
