Are You Ready To Buy A Home?
Are you one of those sitting on the sidelines waiting for the right time to buy a house? Are you waiting for the best possible time, when home prices are as low as they're going to get and interest rates are still low? Instead of just waiting, you could be using this time to get ready so that you'll have everything in place when you decide that it's time to make your move. Buying a home is a complicated, time consuming process, full of snags and hurdles, some of which could prevent you from buying. Take the time now to find out where you stand and clear up any roadblocks.
Qualifying for the mortgage is by far the most difficult part of buying a home. There are things you can do now to greatly increase your chances of getting a loan when you're ready.
Clean up your credit. Get a copy of your credit report from each of the three major credit reporting agencies. If you're willing to pay a fee, there are many services that will do this for you. But you can get copies of your credit report for free by contact the credit reporting agencies directly. Get copies of credit reports for yourself and your spouse, or whoever you're planning to buy a house with.
Review your credit report for errors. If there is any incorrect information on a report, write a letter to the credit reporting agency explaining that the information is incorrect. They will contact the creditor for a response. Get started now, because this process takes time. Don't just do it with one credit reporting agency. Go through this with each of the three. When you apply for a loan, the lender will request a credit report from at least one of three credit reporting agencies, but it's their choice which one(s).
If you are behind on any payments, now is the time to fix that. Catch up any delinquent loans and make sure that you pay all of your bills on time. If there are some damaging things on your credit report, they will count for less as they get older and your more recent history is positive. Going forward, make sure that your payment history is spotless.
Don't open new accounts and try to decrease the balances of old accounts. Having too many loans can bring down your credit score, even if you always make your payments on time. If you're thinking of buying a car, wait until after you've bought your house. It's much easier to get a car loan than a home loan.
Think about your employment history. Lenders want to see that you are steadily employed in the same field for at least two years. If you have plans to make any major changes - like switching careers or going into business for yourself - you might want to wait. It's okay to switch from one employer to another, as long as you're working in the same field.
Save up for a down payment and closing costs. This step will probably require a chat with a mortgage broker or some online research. You'll need to know how big a loan you can afford so that you'll know what price range you're looking at. Also, different types of loans require different down payment amounts. FHA loans, for example, allow you to put as little as 3.5% of the purchase price down. You may be able to negotiate for the seller to pay some or all of your closing costs, especially if you buy a new home from the builder. Figure about 3% of the purchase price for closing costs.
As you can see, improving your credit and saving up money take time. Getting started now will put you in the best position possible so that when you think the time is right to buy a home, you'll be able to move quickly.
Qualifying for the mortgage is by far the most difficult part of buying a home. There are things you can do now to greatly increase your chances of getting a loan when you're ready.
Clean up your credit. Get a copy of your credit report from each of the three major credit reporting agencies. If you're willing to pay a fee, there are many services that will do this for you. But you can get copies of your credit report for free by contact the credit reporting agencies directly. Get copies of credit reports for yourself and your spouse, or whoever you're planning to buy a house with.
Review your credit report for errors. If there is any incorrect information on a report, write a letter to the credit reporting agency explaining that the information is incorrect. They will contact the creditor for a response. Get started now, because this process takes time. Don't just do it with one credit reporting agency. Go through this with each of the three. When you apply for a loan, the lender will request a credit report from at least one of three credit reporting agencies, but it's their choice which one(s).
If you are behind on any payments, now is the time to fix that. Catch up any delinquent loans and make sure that you pay all of your bills on time. If there are some damaging things on your credit report, they will count for less as they get older and your more recent history is positive. Going forward, make sure that your payment history is spotless.
Don't open new accounts and try to decrease the balances of old accounts. Having too many loans can bring down your credit score, even if you always make your payments on time. If you're thinking of buying a car, wait until after you've bought your house. It's much easier to get a car loan than a home loan.
Think about your employment history. Lenders want to see that you are steadily employed in the same field for at least two years. If you have plans to make any major changes - like switching careers or going into business for yourself - you might want to wait. It's okay to switch from one employer to another, as long as you're working in the same field.
Save up for a down payment and closing costs. This step will probably require a chat with a mortgage broker or some online research. You'll need to know how big a loan you can afford so that you'll know what price range you're looking at. Also, different types of loans require different down payment amounts. FHA loans, for example, allow you to put as little as 3.5% of the purchase price down. You may be able to negotiate for the seller to pay some or all of your closing costs, especially if you buy a new home from the builder. Figure about 3% of the purchase price for closing costs.
As you can see, improving your credit and saving up money take time. Getting started now will put you in the best position possible so that when you think the time is right to buy a home, you'll be able to move quickly.
About the Author:
Many new home builders are offering to pay closing costs. Check out these new homes in Chula Vista, where you can get $10,000 towards closing costs or upgrades. Find more information on improving your credit score.