First Time Buyer Guide

Before You Start Looking

  • Decide how serious you are about making the commitment to buy a home.
  • Order a copy of your credit report and FICO score.  You will need to make sure that your credit is in order if you plan to finance your purchase.
  • Think about how much debt you want to take on and how much you can comfortably pay each month for mortgage.
  • Start saving NOW so that you will have funds available for your down payment and to apply towards your closing costs.
  • Contact a loan officer so that you can get pre-approved for a loan.  You should never make an appointment to look at properties without first obtaining a pre-approval letter.
  • Find a professional real estate agent to work with.
  • Make a checklist of what’s important to you and your family.  Do you need a certain number of bedrooms, bathrooms or other specific features to the house and/or neighborhood?  You should definitely share this list with your agent.
  • When you buy a new home, you should give serious consideration to how easy it would be to resell in the event that you have to move some time in the future.

Buying Your First Home

  • Your trusted agent will send you active listings that match your checklist and price range.  Make sure that you fully research any properties that you are interested in.  You can check tax records, local school information and monthly utility averages (just to name a few details you may want to verify).
  • You should find 2 to 3 comparables in the same neighborhood with similar features as the home in which you’re interested.  See how they all stack up.
  • When you feel that you’ve done your due diligence, be prepared to make an offer.  The offer must include an earnest money check, sales contract with any pertinent addendums, and a copy of your pre-approval letter.
  • After you and the seller have finished negotiations and have a signed contract, this contract must be sent to your loan officer immediately so that you can obtain financing.
  • You want to make sure that you schedule a home inspection within the time frame specified in the sales contract.  It’s always a great idea to get a home inspection before you close on a home….even if you agree to buy As-Is.
  • Get a home warranty coverage plan.  This can be negotiated as a seller paid item.  A home warranty plan will protect you from having to pay an expensive repair bill if an appliance or mechanical system breaks down.
  • Make sure that you are promptly providing your lender with everything that they ask for so that you can be cleared to close on time.

DOs and DON’Ts During The Loan Process

  • DON’T apply for new credit of any kind.  If you receive invitations to apply for new lines of credit, don’t respond.  If you do, that company will pull your credit report and this will have an adverse effect on your credit score.
  • DON’T pay off collections or charge-offs.  Once your loan application has been submitted, don’t pay off collections unless the lender specifically asks you to in order to secure the loan.  Generally, paying off old collections causes a drop in the credit score.
  • DON’T close credit card accounts.  If you do, you will lose your good payment history and it can affect your ratio of debt to available credit.  If you really want to close an account, do it after you close your mortgage loan.
  • DON’T max out or over charge existing credit cards.  Running up your credit cards is the fastest way to bring your score down.
  • DON’T consolidate debt to one or two cards.  Once again, you don’t want to change your ratio of debt to available credit.  Likewise, you want to keep beneficial credit history on the books.
  • DON’T raise red flags to the underwriter.  Don’t co-sign on another person’s loan or change your name and address.  The less activity that occurs while your loan is in process, the better it is for you.
  • DO join a credit watch program.  Your bank, credit union or credit card company may be able to provide you with a free credit watch program that can alert you to any changes in your credit report.  This can be a safeguard to help you intervene before the underwriter sees a problem.
  • DO stay current on existing accounts.  Late payments on your existing mortgage, car payment or anything else that can be reported can cost you dearly.
  • DO continue to use your credit as you normally would.  Red flags can be raised within the scoring system if it appears that you are deviating from your normal spending patterns.  Again, make your changes after the loan funds.
  • DO call your loan consultant if you receive notification from a collection agency or creditor that could potentially have an adverse affect on your credit score.

Related Article:  http://themortgagereports.com/first-time-home-buyers-guide/

Written by Dan Green, a mortgage expert who’s been advising consumers for more than 11 years. His work has been featured on CNBC, Bloomberg Businessweek and MarketWatch, to name a few.

 

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