Homeownership in 2013

03/16/2013 - 9:30am

Take 3 Steps Now to Become a First Time Home Buyer 2013

If your goal is to become a homeowner in 2013, here are three steps you can take now to make your home buying journey much easier and much more predictable;

1.      Complete a credit review – If you’re like most of us, you’ll need a home mortgage to finance your new purchase.  Credit then becomes very important as your loan approval, interest rate and corresponding monthly payment will be based, in part, on the strength of your credit score. 

 

As a general rule, the better your credit score the better the terms will be for your home loan.  However, what you might consider to be a very good rating may fall short from a lenders perspective. 

 

In the world of home financing, a credit score of 740 or better will typically provide you with the best rate options.  A person with a 739 score (also a very good score) may fall short of the “A” credit range by one point and pay a slightly higher rate.  In other words, something as little as 1 credit point could end up costing you thousands in interest over the life of your loan.

The good news is that if you start early enough in the process, a knowledgeable lender can review your credit from a loan perspective and, if necessary, help you improve your score in a short period of time.  In many cases, you can gain 10-15 points or more with minor corrections, such as, lowering credit card balances or using dormant accounts.

Helpful tip – The credit score you receive from online “free credit” services may not be the same score that your lender receives.  This is because the scoring model used by lenders is different.  If your goal is homeownership, having a lending professional complete a credit review early in the process is an important step in the home buying process.

2.      Get paperwork in order – Here is a typical list of documents you will need for your home purchase: 

·         Current pay stubs

·         Bank statements to show enough liquid assets to cover down payment and closing costs

·         W2’s for the past two years

·         Federal tax returns for the past two years

·         If self-employed – business returns for the past two years along with K-1, if applicable

·         Form of identification (drivers license)

·         Divorce decree and separation agreement, if applicable

 

When completing step one above, it’s a good idea to have your lender review these items in advance of your purchase as well.  This will allow you time to gather anything that’s missing or that needs correcting.

 

3.      Narrow your home search – Even in a buyer’s market like today, a well-priced home in a desirable area can be sold in just a few days…sometimes hours. 

 

 To gain a leg up on your competition, ask your realtor to help you narrow your home search to just a few areas.  After you narrow your search, examine some recent sales and come up with a home style you like and a price that’s fair within your market.  Be realistic and stay within your budget. 

 

By being proactive, the next time a well-priced home shows itself you’ll be ready to make an offer quickly and with confidence. Your competition, however, will just be starting their research. 

 

For comments or questions, feel free to email info@mywayhome.com