Dodie's Guide to Buying a Home
Choosing a Realtor
When thinking about buying a home, you also need to find that certain someone that can help you navigate this path to home ownership- how do you find that person you can trust to purchase what will most likely be the biggest, most important purchase of your life so far! Talk with your friends, ask around to see who may have a recommendation of a good real estate agent and interview your prospective realtor- ask questions such as: what is your availability for viewing homes? Can I review documents ahead of time that I will be asked to sign? Can I email/call/text you regarding homes, how soon will you respond? What are the top three things that separate you from your competition?
The Pre-Approval Process
Unless you have a bundle of cash, you will need to be pre-approved for a loan before looking at prospective homes. This is a process that is time consuming and can take several days but is all important! Your lender will work with you to determine how much you qualify for so that you know how much you can comfortable afford. To pre-qualify for a loan you will have to provide your employment and credit history, they will also look at your bank account to see if you have enough money for a down payment and closing costs. Keep in mind, you also need to budget for property taxes, homeowners, mortgage insurance and HOA fees. If you do not have a lender you work with, ask your real estate agent for a list of lenders- call or interview at least two, your lender is very important!
5 elements of a credit score
Your credit score is like a pie that is divided into 5 unequal sections--
-35%-Payment history (this includes late or missed payments, bankruptcies/foreclosures, lawsuits, liens, judgments)
-30%- Amounts Owed (number of accounts and amounts owed, credit line utilization)
-15%- Length of Credit History (age of oldest account, age of newest account, average age of all accounts)
-10%- New Credit (number of new accounts, new accounts added to rapidly, % of new accounts to old accounts)
-10%- Types of Credits used (mix and amount of various credit types- credit cards, retail accounts, installment loans)
Do’s and Don’ts during the loan process
Do's
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DO-let your loan officer know of any changes to your address, job, salary, credit, etc
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DO-protect your credit score and educate yourself on what can affect your score during the loan process
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DO-get a homeowner’s insurance policy that covers the new mortgage amount or the replacement value of the home
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DO-keep records of any bank transactions, particularly larger deposits and transfers
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DO-schedule a home inspection
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DO- ask your loan officer and realtor any questions along the way. That’s what we are here for!
Don'ts
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DON’T-get new loans or consolidate credit cards, this can negatively affect your credit score as well as your debt-to-income ratio, a key factor in a loan decision
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DON’T-change jobs if avoidable. Continuous employment of 2 years or more looks more desirable on a mortgage application
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DON’T-don’t spend the money you’ve set aside for your down payment and earnest money
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DON’T-cosign for another person. This might affect your debt-to-income ratio
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DON’T-make any large purchases during the loan process (cars, appliances, jewelry, etc) if avoidable
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DON’T-make any significant changes to your investments, this includes large withdrawals, opening/closing new accounts and unexplained large deposits