Thinking about buying a home in the spring? It may not feel like it right now, but it truly is just around the corner. Depending on your financial situation, your planning probably should have begun months ago—but don’t worry! For the first time home buyer who is reasonably confident about his or her source (or sources) of income and feels fairly certain they have the credit score needed to qualify for a mortgage, you stil
|applying for a loan|
l have time.
Here are 7 things you should—and shouldn’t—do before the buds are on the trees:
1. Check your credit score and correct any errors – The better your credit score, the better the interest rate and terms you’ll be able to get from a lender. You should review your credit report from each of the three credit bureaus at least once annually; you may obtain one free copy of your credit report each year.
For more information, contact the Annual Credit Report Request Service at:
• P.O. Box 105281 Atlanta, GA 30348-5281
• (877) FACT ACT (1 877 322 8228)
• Or www.annualcreditreport.com
Check carefully for any errors and report them immediately. Each of the credit bureaus must investigate and respond within 30 days. If you are in the process of applying for a loan, immediately notify your lender of any incorrect information in your report.
You can also dispute any errors by contacting the credit reporting agencies directly:
• Equifax: (800) 685-1111, www.equifax.com
• Experian: (888) 397-3742, www.experian.com
• TransUnion: (800) 888-4213, www.transunion.com
2. Don’t borrow or open any new lines of credit – To protect your credit, avoid opening any new credit card accounts, taking out any new loans, or even cosigning for a loan.
3. Make sure you have enough cash for a down payment and closing costs – Depending on the price of the home you can afford—which is based on your income, credit score, and the amount of debt you have currently—you’ll need at minimum, five percent down. There are down payment assistance programs, but some restrictions may apply. Some loan programs also allow for cash gifts to be used for the down payment and closing costs.
4. Start looking for the right real estate agents – Having an agent that understands your needs as a first time home buyer, knows the community where you’re looking to buy, and can negotiate a fair price is critical. Interview at least three and check references. Go to some open houses to see a potential real estate agent in action. The right fit is important, so be sure to go with someone you’ll be comfortable working with.
5. Keep an eye on interest rates – Interest rates began to rise for the first time in almost a decade at the end of 2016. The increases have been incremental; usually a quarter basis point. The Federal Reserve monitors these rates and adjusts based on employment statistics and the rate of inflation.
6. Select a lender and get pre-approved – Choosing the right lender is as important as finding the right real estate agent. Shop around and look beyond the interest rate being offered. You’ll want a lender with a wide selection of loan programs and excellent customer service.
Once you find the right lender, make sure you’re pre-approved for your loan. A pre-approval tells you the price range you can afford and will help in working out a negotiation strategy with your agent. A seller is more likely to take your offer seriously if you have a pre-approval as compared with another buyer who does not.
7. Begin looking and keep an open mind – Depending on the market and the price range you’re looking for, you may find that available homes are hard to find. In a sellers’ market like this there is often less room to negotiate. This doesn’t mean you have no leverage, even as a first time home buyer. Each situation is unique. Sellers often have very specific time frames for moving that you could possibly accommodate. Or, they may be receptive to negotiating price if you’re willing to overlook costly repairs or renovations.
If you have a good credit score, pre-approval from a reputable lender, the money for a down payment, and can close when it’s convenient for the seller, you’ll be ready to buy when the right house comes along this spring.