Wednesday, March 4, 2009

So you think you are ready to buy a home?

Here is a list of things you need to do before you start to shop for a home, and when you need to do them.

Any time you buy a home, it can be quite stressful, and mind boggling, especially for the first time buyer.

The following time line starts 1 year before you seriously start shopping for a home. You can do it quicker if need to, but you will be smart to take your time and walk thru all the steps in order. The more time you give your self for this process, the better off you will be in the long run.

One year out (or as soon as possible)...

Get your credit reports. Every American is entitled to a free credit report every year. Contact on of the big 3 credit reporting companies. Errors on the report can force you to pay a higher interest rate on your mortgage, or even prevent you from getting a mortgage at all. Go to This information comes from Equifax, Experian, and TransUnion. Make sure you look for accounts that aren't yours, and collection accounts for debts you don't owe and negative marks that are older then 7 years.

Get and improve your FICO credit scores. Your credit scores, which are 3 digit numbers used to gauge your creditworthiness, help determine the rates you can get for a loan. There are tons of different credit scoring formulas, but the one used by most lenders is the FICO

Deal with your debt. Most people don't need to pay off their college loans, auto loans or other low rate debt before getting a mortgage. What you do need to take care of is the toxic debt, credit card balances! These are sure signs that you are living way over your means. Get them taken care of now. Once you are in your home, there are many, many expenses associated with home ownership(property taxes, insurance, repairs, decorating, and maintenance)

SAVE SAVE SAVE, then SAVE some more! Stop eating out, do you need all those cable channels? Do everything you can think of to put away as much money as possible. FHA loans only require 3 1/2 percent down, You need 20 % down to avoid PMI.

Put your bills on automatic pay. A single 30 day late payment can drop your score 100 points. Been there, done that! Set it up with your bank. Set up automatic debit payment that comes directly from your checking account.

6 months out

Start checking out your mortgage options. Too many people today are loosing their homes because they didn't understand what kind of mortgage they had. If you cant afford a 30 year fixed FA-GETABOUTIT!! To many times there are low teaser payments that allow the buyer to purchase more then they can really afford. Then the payments jump and they can no longer afford the home.

Research all the costs of owning a home. Your mortgage is just the start. You will have property taxes, and insurance on your home. You could be paying HOA and condo fees as well. Your utilities might be higher then an apartment and there will be maintenance and repair costs.

3 months out. The FICO scoring formula is sensitive to how much of your available limits you're using on credit cards and other revolving lines of credit. The less is better.

Don't open or close any accounts. Until the mortgage process is complete and you've moved into your home, don't do anything to cause actions that could harm your credit. Don't buy new appliances, or a new car. You could be living in it.

2 months out.

Get an idea of the mortgage rate you can expect. Get a new set of FICO scores. Checking your scores doesn't ding the report, and talk to some mortgage lenders about what rates you might qualify for. Don't apply yet, and don't allow your credit to be pulled.

Understand the effects of mortgage shopping on your score. You want to get the best terms and rates possible, which means you will need to shop around, but how does that effect your credit score? Here's the deal; every time you give a lender permission to check your credit, a "hard inquiry" appears on your credit report. Good for you that the FICO scoring formula lumps all mortgage related inquires made within a specific time period together and counts them as one. You want to shop around, but typically in a short period of time, and usually after an offer has been accepted.

Get pre-approved! This is when the lender gives a commitment to make you a loan, is different and more valuable to sellers then a pre-qualification, which merely gives you an idea of the size of the mortgage you might be able to afford without making any commitments. You don't have to use the lender that gives you the pre-approval, but it does involve giving permission for that "hard inquiry", but the potential ding is well worth it because you are in a better and stronger position with sellers.

Consider a mortgage broker. Once the offer is approved, you can shop for a mortgage on your own, but if you want a lot of hand holding through this process or your credit isn't great, you might benefit from the services of an experienced, ethical mortgage broker. STAY AWAY from the fast talkers, use a large national company with a great reputation.

Begin to research neighborhoods and look for an agent. If you are in Pa, please give me a call!

My web site is

Once you have found your home, and your offer is accepted... start to shop for a mortgage. You do need to move fairly quickly, the process can take 3 to 4 weeks.

Arrange for an appraisal, do your home inspections, and do a walk through. The appraisal is required for your loan to be approved, An inspection isn't necessarily required, but do it any way. It can alert you to any serious problems before the deal closes. The walk through is done within 24 hours of closing so you can make sure any repairs have been completed by the sellers that you have agreed upon.

Home owners insurance. Mortgage lenders require this coverage. You will need to prove you have it at settlement , or it ain't happening.

Get your exact closing costs. You will need to know how much money you will need at closing. Closing is when all the papers are signed, and all the agreed upon amounts are paid, which can include your down payment, and your share of legal fees, property taxes and title insurance.

Afterwards,you now have a set of keys to your brand new home!

My name is Rick Sapovits and I look forward to helping your next home.

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