Follow these 6 Steps to Buy a Home in 2017
Follow these 6 Steps to Buy a Home in 2017
T ’is the season to buy a home. School is out of session and if families plan to move, now is the time most make the change. With that in mind, there are still steps you can take to make the home purchase and move smoother. Here are just a few of the things you can do to smooth the process of buying your next home.
1. Figure out Your Budget and How Much Home You Can Afford
Buying your dream home is exciting, but if the cost is above your paygrade, it can soon turn into a nightmare. Know your budget before you go shopping. Click for your free financial worksheet. Lenders use your debt to income ratio when underwriting your loan. Your Debt to income is your total monthly expenses as a percentage of your gross income (expenses divided by income). Once you know how much your other expenses are, figure out your ideal housing payment. Lenders like Here is a quick formula for budget purpose: NH (New Housing cost) = (.36 x GMI, Gross Monthly Income) minus Other Expenses. In certain situations, FNMA, or Fannie Mae, now allows up to 45 percent or by exception, up to 50 percent, so don’t give up if your expenses are a little higher than the low end. Decide what your priorities are, and what you are willing to give up if you buy more house. Remember house payments last a long time, and require maintenance. That means you need to be able to set aside funds for upkeep of your new castle.
2. Check your Credit Reports
Request each of the three credit reports. Once every twelve months, you can obtain each of your credit reports for free at https://www.annualcreditreport.com/index.action. Look over your credit reports carefully for accuracy. If you have legitimate collections reported on your credit report, resolve what you can afford to resolve. If collections show up on your report that should not be there, dispute those collections and other adverse information with the credit bureaus reporting it. Allow time for the corrections to show up before making your loan applications…or speed up the process – click here to have your credit repaired by professionals at procreditrepair.org. Adverse credit can affect your home purchase in multiple ways, from being denied the loan, being required to pay a larger down payment, or being offered a higher interest rate on your loan. The better your credit, the smoother your purchase process will be.
Do NOT shop for other large ticket items before your loan closes. Sure, that new furniture would be great in your new home, but multiple hits on your credit report can drop the score. Some lenders and banks will put a new credit report prior to the loan closing. Any changes in your credit may affect the purchase outcome.
Prepare a letter of explanation for any issues on your credit report that cannot be removed. Help the underwriter know why you are a good risk.
Don’t Have Traditional Credit? If you do not have at least 3 credit accounts, one of them more than 24 months old, get a payment history on alternate accounts. Monthly obligations such as cell phone, rental payments, car insurance if paid monthly, or any other account that shows responsible monthly payments were made can be used to demonstrate credit worthiness. Check with you loan officer or credit repair firm to find out which accounts will most benefit you, and ask the creditors to report your history to the credit bureaus.
3. Get Financing Pre-approval
Unless you are buying a home for cash, you will need to apply for a loan. You do not have to wait to find your home to apply for a pre-approval on a mortgage loan. Be careful of the terms here. Many loan officers will offer a free prequalification. Being prequalified tells you how much you can afford, but not whether you can buy it. Being preapproved tells the seller that you have the ability to buy the home. Preapproval on a loan tells you that as long as documentation and collateral back up what you state on your application, and nothing changes before closing, that you should get the loan. If you submit your paystubs, recent bank statements and credit explanations to your loan officer, he or she can update the application as needed and your pre-approval is less chancy. If your credit is clean, preapproval even without those items is pretty sure. Your loan officer will give you a booklet on your rights. Read it to help you understand the documents in the lending process. Be aware that shopping for big ticket items before your loan closes, may change or void your mortgage approval. If you are borrowing funds for your new home, wait to buy your new furniture until you are cleared to close on your loan.
Check for community down payment plans. Some communities offer down payment plans as silent liens or grants to help you into your next home. Many of these have very attractive terms, so it doesn’t hurt to look up communities where you are interested in living, and find out what is offered.
4. Find a Real Estate Agent, or Be Prepared to Negotiate
You don’t get what you don’t ask for, so if you are not comfortable negotiating the terms of your home purchase, find a realtor with a good reputation and good feedback on their site. You can look up a realtors license online, and the National Association of Realtors has a code of ethics established in 1913, before real estate licensing laws were in place. Check reviews on real estate agents you are considering. Ask friends and family who recently bought real estate if they were happy with their realtor. You or your real estate agent may be able to negotiate a lower purchase price, or have the seller pay your closing costs to save out of pocket cash needed. When you offer to buy, make sure the contract is contingent upon home inspection report. Most real estate agents already do this or offer a home warranty.
5. Find a Good Home Inspector
Some people like to buy a fixer upper, but only if the repairs needed are within your scope and budget…and only if the price is reduced to take the cost of repairs into account. Find out before you buy how much would be needed for any repairs requirements on the potential real estate purchase. Is the purchase price low enough to allow for the repairs, or does the price need to be renegotiated?
6. Find Your Next Home
Congratulations on your decision to buy a new home. You have prepared for the homebuying process, now either go online or into your realtor’s office and find homes you want to view. Make a list of pros and cons of each possibility to make your decision and enjoy the process. New surroundings seem a time of new possibilities. We hope this makes the process of buying a home smoother for you and your family.