What's Next?
The dream of home ownership may be easier to achieve than many people realize. Mortgage interest rates are still low and more lenders are offering flexible first-time homebuyer programs.
Yet a recent study discovered half of non-homeowners have not acted to purchase a home because of perceived barriers, such as being afraid to make a costly mistake, confused about the process of buying a home, intimidated by mortgage application paperwork, concerned about not being able to afford the home they want or need, and believing they may not have enough money for a down payment and for closing costs.
These guidelines may help many prospective homeowners:
Where to start? Many community service organizations and banks offer free home-buying seminars or one-on-one counseling. The Internet also provides a wealth of information.
What about credit? While lenders look at many factors in evaluating your credit for a home purchase, two key variables are in your control: your record of making payments on time and your demonstrated ability to avoid excessive debt. If you think you have a questionable credit history, get a copy of your credit report. Doing what you can to clean up negative or incorrect information will help you qualify for a home loan. You can get your credit report at www.experian.com, www.equifax.com or www.transunion.com (under a new federal law, you may now receive one free copy of your credit report per year from each of the three major companies listed above; see www.annualcreditreport.com for more information). If you've never applied for credit, some lenders will consider your history of paying rent and utility bills.
Select a lender who understands your needs. Talk with several lenders. Ask friends and family for lender referrals. Real estate agents and community assistance organizations are good lender referral sources.
The lender you choose should have a strong reputation for customer service and offer first-time buyer options and financing ideas that take into consideration your situation. For example, many first-time buyer mortgage programs require only a low down payment or even no money down. Some programs feature no closing costs.
Get pre-qualified and pre-approved. The lender you select will make a preliminary assessment of whether it can make a loan to you based on your income, credit history and other financial criteria. This pre-qualification can mean a "pre-approval" from the lender - a confirmation it will fund your home loan if the information you presented is accurate. Ask for a pre-approval letter to show real estate agents.
Start shopping. Take your time and make a thoughtful decision. Even if you think you have found your dream house, check out the neighborhood, parks and the schools in the area. Make sure the community meets your needs.
Make an offer. Your real estate agent can tell you prices of comparable houses in the same neighborhood. Work with your real estate agent to develop an offer strategy that fits your budget and stands the best chance of being accepted.
Complete your loan application. Be prepared with employment history, previous tax returns, bank statements, verification of employment and recent paycheck stubs.
