Buying your first house is one of the most important decisions you are going to make in your life. Here I am going to give you some Tips to be ready to take that step.
1. Whip your finances into shape may bring you more success.
Look at your credit and work on it if necessary.
As you may know, you can have a free credit report once a year. Just before to start looking for a house, to hire a realtor o talk with a lender, see how is your credit score to know if this is the right time to buy a house or if you need to improve it. Having a good credit score will give you much better loan terms. Credit above 720 is considered as an acceptable credit risk, therefore, have a little interest rate adjustment. Between 620-660 is marginal and will take a more exhaustive review. Below 620 is a high risk, so only a few products and programs are available. With that number in mind, you can work on your credit score before taking any actions in a home buying process.
Set your budget.
Determine a budget you are going to be comfortable to pay, is a key. Remember you will be paying for a house, in most cases, for 30 years. Look at your monthly expenses to see what you are going to be able to spend in your house. Never just count principal, interest, taxes, and insurance. There are other hiding payments you need to have in mind like maintenance and repairs, and your obligations such as cell phone, utilities, car bills, and other monthly expenses that lenders rarely consider when qualifying you for a loan. Just because they approve you for certain loan amount it doesn’t mean that you can afford the monthly payment that comes with it.
Setup your assets
Lenders are going to ask you for your bank statements from the past two months to verify the availability of funds. They prefer to see funds that have been in the account for the entire period of the bank statement. If you are going to make a deposit in your checking or savings account from other assets, do it before 60 days of contacting a lender, or you are going to be explaining in detail where it came from. Avoid applying for new credit cards or loans, or acquiring new debt from the beginning -when you are applying for the loan- until the closing -when you have the keys to your house.
2. Shopping for the best lender.
Most of the first time buyers make a big mistake to get a loan from the first and only lender they talk to. This action may well make them lose a lot of money. Most think that getting an estimate from multiple lenders is going to lower their credit score, but this is not totally true. During 30 days after getting your first pre-approval letter, you should consult at least three different lenders to negotiate your loan terms. You should pay attention to:
This is the time to compare mortgage rates from different types of lenders. It can save you thousands in the life of the loan. Don’t be shy, negotiate your rate from the beginning. Interest rates fluctuate, and different lenders may offer promotions for certain loan products. Locking the rate can help you have a better interest at the time of the purchase, but be careful, once you lock your rate, you will have to close the deal within a certain period of time, otherwise, you will have to pay a fee.
Discount points represent pre-payment of interest at the beginning of the loan to reduce the interest rate. That means you are going to pay more upfront in order to pay less during the life of the loan. It only makes sense if you are going to live in the house and not refinance, for a long period. Your realtor should help you to understand discount points.
Most lenders may charge you with loan origination fees to cover the administrative cost of making a loan. It can be charged for many reasons such as closing fees, underwriting fees, documentation fees, etc.
You must pay close attention to this. Responsiveness and communication are essential in a lender in order to make the mortgage approval process run smoothly. You should have a reliable point of contact for your questions.
3. Choose the right real estate agent.
The most important feature you have to be looking for in a realtor is her knowledge. Finding a house is the easiest part of the transaction and you can do it by yourself on the internet. You don’t need an agent to do that. However, after that initial step, there will be lots of challenges and obstacles you are going to face in order to close the deal. Your real estate agent should be a champion in:
- Writing a winning contract
- Negotiating the price
In addition, she should master “deadline compliance”, because time is essential to protect your deposit.
Several last minute issues and many other “unexpected surprises” that arise in a transaction will only be appropriately dealt with if you are counting with the help of a knowledgeable agent.
Now you are readier to start looking for houses. Be aware though, the decision of choosing your house needs to be much more objective than emotional.
And feel free to give me a call if you are having issues with any of these issues. I’ll be happy to help you.