Before you start viewing properties, it’s a good idea to make sure you can afford the home of your dreams! The following are some steps to assure the process will be much easier.
Build your financial file:
Your file should contain all of your important financial documents. Regardless of the loan type, lenders will need financial information about you. Make copies of the following to take to the lender:
Check Your Credit Rating – Your credit score will have a huge impact on what type of property you can buy and at what price.
There are several free credit reporting services online. Credit scores range between 400 and 800. 620 + is considered “good”; 680 + is considered “premium” and may possibly help get you a lower interest rate. Your lender will also check your credit. If applying at several banks or mortgage companies, please ask if they use soft hits, so as not to lower your score with too many inquiries.
Ask your lender how to improve your credit score if you need to. You must be diligent in your efforts, if you truly want to own the home of your dreams.
If you want to own your own home, your chances of getting the house of your dreams is greatly increased if you have a down payment that includes funds for closing costs (appraisal, miscellaneous fees, escrow, title insurance, etc.) and expenses such as inspections. It would also help to try to pay down existing high interest credit cards.
Stay on task — Now is not a good time to change careers, move your money around, forget to make a payment on time or buy big ticket items. Lenders like stability; so if you are considering any major changes, it pays to meet with a lender and ask how to proceed before you make any changes! If you are tempted to buy a big ticket item, consider the following:
Even a $500 a month payment on a credit card or auto loan could lower the amount of home you can afford tremendously.
The pre-qualification process can be completed fairly quickly, based on less information than is required for getting pre-approved. While it is fast and it does help, a pre-qualification letter is an opinion from a lender of the maximum amount of real estate for which you can qualify. In a competitive market, an offer from a buyer without a pre-qualification or pre-approval letter could lose out to an offer from someone who is better prepared.
Pre-qualification is not a pre-approval. It is a simple statement from your lender stating it appears you are qualified. Pre-approval is the actual verification of everything in your financial file by the lender and could also make the difference in a multiple offer situation.
There are several benefits to going the extra mile and getting a pre-approval letter. First of all, you will know exactly how much real estate you can afford. When you find a property you want to buy, your offer will be better positioned than that of someone less prepared. Finally, being pre-approved is more efficient; it reduces the amount of time it will take your lender to fund your loan.
What to expect from your REALTOR®:
This is where the fun begins! Our MLS email notifications will allow you priority access to every home with your criteria as soon as it is listed. Your agent will also search for homes he or she thinks might fit your criteria. When you are notified of home that you might want to see, a quick drive by will let you know if you need to call your agent for a viewing or rule it out. You only need one, so when you find the right home...don’t wait! Have your agent show you the home and be ready to make an offer.
Your agent will provide you with a comparative market analysis on your prospective home in order to assist you in making an informed decision. Be prepared to negotiate. It’s very rare your first offer will be accepted. Keep in mind that contract negotiations are not limited to price; they also include timing, contingencies and much more. By the way – it is always your choice when it comes to choosing a closing agent to put in the contract.
When you have an executed contract, take a copy to your loan officer and apply for the loan.
When searching for a loan, be sure to check with more than one lender to get the best interest rate and loan terms for your mortgage. Banks and mortgage companies have different fees and rates, so “shopping your loan” might save you a lot of money. Be sure to ask your REALTOR®, friends and family for lender references. Before you lock an interest rate, be sure to ask your loan officer if you are getting the lowest rate possible. Interest rates will determine how much a mortgage will cost each month and come in fixed or adjustable terms.
Select an inspector who is licensed in the state in which you are purchasing. Ask your REALTOR® for advice and help in arranging any and all needed inspections. Wood-destroying insects, septic and radon are a few of the most common. We highly recommend you have all the inspections offered.
The lender will make arrangements for the property appraisal and survey. Not all lenders require a survey, but most all will require an appraisal.
This is where all the hard work pays off and you become the owner of a home! Before closing, you should have your agent arrange a walk-through of the home to make sure nothing has changed in the property since the purchase and sale agreement was signed. The “walk-through” is usually done the day before or day of closing. During the actual closing, deeds, loan and other documents are prepared and signed. This includes the HUD Settlement Statement, which details all the costs related to the sale of the home. And remember to bring your license and certified funds, if any are due.
Congratulations! You are a homeowner!