10 Steps to Buying a House A Roadmap to Home Ownership
Buying a house doesn’t have to be complicated. Use the following roadmap as a guide to help you understand the journey that you will need to take to purchase a home. There is no set timetable, your journey can be short or long depending on several different variables like your credit but, having a plan will ultimately help you avoid some common pitfalls and achieve your goal of home ownership.
1. Check Your Credit Reports and Scores
You can access your credit reports for free at a myriad of places like annualcreditreport.com, creditkarma, creditsesame, etc… but, if you want an accurate credit score (FICO score) you will want to go to myfico.com. MyFICO.com will give you your credit reports from all 3 credit bureaus as well as 37 different FICO scores including the scores used by mortgage lenders for home loans.
Make sure that the information in your credit reports is 100% accurate and if your credit score isn’t high enough to qualify for a mortgage or too low to get the best interest rates and terms possible, you will want to work on improving your credit scores.
2. Improve Your Credit Scores
If your credit scores aren’t up to par you will want to work on increasing them. Feel free to use this quick guide to help you increase your credit scores or you can always hire a professional credit repair company to do the work on your behalf.
3. Figure Out How Much You Want To Spend On A Home.
You’re the only one who can determine how much you can afford to pay for down payment, your monthly mortgage payment, insurance, closing costs, etc…
For example, determine how much money you have available for your home purchase by adding up all of the available money that you have, your checking accounts, savings, investments, and cash. Then, subtract moving costs, money for renovations for your new home, a small emergency fund, and you will have the amount that you can allocate toward a down payment and closing costs. According to Zillow, on average buyers pay roughly $3,700 in closing cost fees.
4. Explore your mortgage options.
There are many different types of mortgages out there, conventional, FHA, VA, USDA, Jumbo, etc… Research the different loan terms, interest rates, and talk to lenders, loan officers, and mortgage brokers to help you decide the type of loan that fits you best.
5. Get Pre-Approved.
A pre-approval means that your income and credit have been verified through documents which you provided and you are pre-approved for a mortgage. Don’t get this confused with a pre-qualification which is solely based on loose information from your credit and your DTA (Debt to Income Ratio).
A pre-approval letter helps show sellers that you are a serious buyer.
6. Find Your Home.
This is the fun part. With a pre-approval letter in hand, you drive around looking for your dream home. You already determined your budget so you know what you can and cannot afford. Once you find your dream home make an offer. Don’t be discouraged if your first offer isn’t accepted, negotiate.
7. Compare Loan Terms.
Get some estimates from a few different lenders and compare the terms, rates, and monthly payment amounts. Find the loan terms that you are comfortable with and get the best deal possible.
8. Choose The Loan That’s Right For You.
Choose the best deal on the table and submit your documents to get ready to close on your new home.
9. Shop For Closing Services.
At the top of page 2 of your Loan Estimate, there is a section titled, “Services you can shop for.” These include services such as the property appraisal, title insurance, home inspection, etc…. Your lender will give you a list of service providers but, there’s no requirement to use them. Feel free to shop around and save yourself some money with less expensive options.
10. Close on Your New Home.
Examine the closing documents to make sure that there are no errors and all of the terms are as you previously agreed upon. Then, sign the closing docs and get your keys.
Now, it’s time for some Champagne.
NOTE: If your credit score is holding you back from being able to qualify for a mortgage, CreditFirm.net is here to help improve your scores and get you ready to buy a home.
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