The decision to buy your first home should be made with a lot of thought. There are advantages and disadvantages to both renting and buying, depending on your circumstances. Owning property builds equity, provides a sense of community, stability and independence. With low interest rates and a dream of home ownership, why rent when you can buy?
Sometimes, having someone else bear the responsibility for property repairs, maintenance, and taxes is preferable to taking on that responsibility yourself. Factors such as job instability, how long you plan on living in an area, or other life-style changes indicate that home ownership might not be the best choice or option right now. It's always important to weigh options carefully before taking this important step. Stop! Don't start looking for that dream home yet. You've got some homework to do first.
Step #1 - Get Your Financial House In Order
Assuming you don't have enough cash in your pocket to buy a home outright, you will be asking a lender to finance your purchase. Stop right here. Before you allow a lender to pull your credit reports, you need to know what they will find. Missed paying your school loan? Late on a few credit card payments? Multiple credit cards fall out of your wallet when you open it up? If the answer to any of these questions is "yes", you may have a problem. Credit scoring has become an important factor for creditors to use in determining your ability to receive a loan. Clean up bad credit, don't take on new debt and save as much as possible for your down payment. As explained by a mortgage lender at one of our seminars, "Some buyers whose eligibility for a loan is marginal to begin with make the mistake of rushing out to purchase furniture for their new home (on credit, of course) during the application process. When the new debt is reported, suddenly their credit scores go down and the loan falls through." Technology certainly makes it easy to track changes quickly and applicants are urged to be extremely cautious of anything that could reflect a change on their credit scores during this process. If you're someone who likes to check rates on-line through multiple applications to lending companies like eloan.com eloan.com and lendingtree.com lendingtree.com, be aware that each lender who receives your application in order to compete may be pulling separate credit reports on you. Many FSBO websites want to pre-qualify you for a loan BEFORE you can get the seller's phone number. Giving out your social security number to a stranger over the phone at the very least will result in your credit being pulled, running the risk of lowering your credit score. It can also be downright dangerous due to the increasing risk of identity theft.
Multiple credit checks made over a period of time, (a few weeks to months) can severely damage your credit worthiness. Best practice - pull your own credit reports from all three agencies and hand carry them to a few reputable local lenders and ask for their help. When you are close to purchasing, choose the lender and program that best suits your situation and allow that lender to pull your credit to perform a pre-approval.
Pull your own credit by logging onto: annualcreditreport.com annualcreditreport.com. This website has been established by all three credit bureaus and does not require the purchase of anything in order to receive a FREE credit report once a year. You wil pay a small fee (under 10. to receive your credit scores as well), but it is recommended that you know what your score is before you begin your house hunt.
Step #2 - Make Your Wish List
Now it's time to make a list of specifications for your home search. You have a good idea how much you can afford (don't forget to include taxes, insurance, and any other costs beyond your monthly mortgage commitment) and you can begin to geographically search for a property in your price range. If you are planning with a spouse or partner, sit down together and each make up a list, then exchange lists.
You may find things that need further discussion before you begin your house hunt. For example, you are willing to commute an hour to work, when your partner wants to commute by bicycle every day! What is most important to you? Community, schools, distance from work, recreational opportunities, country or city, condo or single, or two-family home? What style of house appeals to you? What about a fixer-upper? Do you have animals that may require certain space? Are there personal or family needs? Note: A list that is too vague will lead to frustration, wasted time looking at unsuitable properties, and communication issues. A list that is too specific may lengthen your search as you are less flexible to include properties that may have some but not all of your specifications. Don't be afraid to revise your list a few times once you have begun your search. A home that was previously excluded could now be back in the running. Begin signing up for online property data feeds available through the MLS or possibly your regional for-sale-by-owner service to see what's coming on the market. To obtain information on local for-sale-by-owner resources, log onto: fsbonetwork.com fsbonetwork.com and search for properties in your area. Attend some open houses and determine whether homes in your desired neighborhood meet your expectations. If not, consider your options.
Step #3 - Hit The Pavement
At this point, many prospective home buyers contact a real estate agency, usually because they see a property they like and call the listing agency. Be aware of the fact that, as a buyer, contacting a listing agency puts you in contact with a seller's agent, not a buyer's agent. A seller's agent works for the seller of the property, NOT the buyer. Never say anything to this person that you don't want the seller to know! A typical real estate agency can house agents working as seller agents, buyer agents and duel agents. The object is to keep as much commission as possible within the same agency.
If you feel that you need agent representation, you may want to consider using a buyer broker, or better yet, an exclusive buyer broker. This kind of agent does not list property and is not housed in an agency where they are sitting next to a seller's agent. An exclusive buyer broker can show you listed properties, foreclosures, new construction and even for sale by owner properties (Note: You do not NEED an agent to view for sale by owner properties.
Don't forget about properties that are for sale "by owner". Often, these are some of the best homes you will see, and are in "show ready" condition. If you are working with a buyer broker, be sure to let the sellers know this up front. Reassure the sellers that they will not be expected to pay your agent's commission. It is also recommended that you sit down with your agent to remind him/her that you want to be shown all homes that meet your criteria, without regard to who pays their commission. Be very aware of any contracts you may be asked to sign. Make sure that you do not give away your right to find a property on your own, even if using an agent.
Step #4 - Ready To Buy? - Show Me The Money
You have your house picked out - now you need to find the greeneasylife.com best loan option. Hopefully, you took the time to research these options early in the game. Your neighborhood bank may have been your first stop in searching for a home loan, but consider this. Banks sell a variety of financial products and are very conservative by nature. Due to a many reasons (credit or employment history, government or municipal program eligibility) you may want to include a mortgage company or mortgage broker to help you determine your best option. Many people assume that the best program for them is the one with the lowest interest rate. Interest rates are only a part of the puzzle and over a the life of a loan may not mean as much as other considerations. Take your time to compare offers and make sure you understand the fine print.
Although you may be tempted to look at online companies, there are many reasons to look locally for a reputable lender. There is no substitution for being able to sit down, face to face, with someone when discussing what will most likely be one of the biggest financial decisions of your lifetime. Interview two or three lenders in advance. A good lender representative will spend time with you to answer your questions and help you work through any potential credit issues in advance. If they won't, or are "hard sell", move onto the next company. Good luck finding your dream home!
Liz Provo, Editor/Publisher Picket Fence Preview 4B Liberty St., Easthampton, MA 01027 (413) 529-2970 or (888) 920-FSB0
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