If you are currently renting and considering purchasing a home, I recommend the very first step should be a comparison of rent versus own, to see if it makes sense for you to purchase a home or keep on renting. Most mortgage professionals have computerized programs available or you can go to our Finance Calculators that we’ve made available to assist you.
It is important that the information you put in is accurate, use 3-5% for annual appreciation, do not forget to put at least 0.5-1% of the purchase price for annual maintenance of the property and an additional 1% for the real estate taxes, insurance and HOA. If the results recommend in favor of purchasing a house, find a professional mortgage company who specializes in FTHB, ask for their testimonials and references before you waste your time.
Once you have decided on the mortgage professional you want to work with, at the first session take your tax returns, pay stubs, bank statements and 401K if applicable. This meeting is to re-affirm that based on all the financial information it makes sense for you to buy a house. Remember at this time you are not making an application for a loan or running your credit, this meeting is just to make sure you are making the right decision and with average rates approximately how much house you should be considering.
If you feel pressured by the person to get an application or run your credit even at no cost, you have the wrong person. Every time your credit is run it affects your FICO score which in turn could affect your overall cost of the loan. If you are aware of any credit issues, this is the time to ask the mortgage professional you are dealing with about their past experience and the results of their previous clients who were in similar situations; make sure that this service is provided to you at no cost. Please do not fall into the trap of paying hundreds to get your credit repaired.
Remember, your mortgage professional is not an expert on tax savings, so the next appointment should be with a CPA, if you do not have one, look for one who will offer a free 30 minute consultation. This step is important to ensure you are really getting the tax savings you have used to budget your mortgage payments.
Now that you have a fairly good idea as to what you will qualify for and can afford, it is time for you to make a loan application and get the final numbers based on your credit and other factors and get pre-approved.
Seeking complete pre-approval for financing prior to making an offer on a property is a sound strategy that can help you get the best deal possible, especially if you plan to make minimal or no down payment. The seller is often leery of the reliability of a buyer with little or no down payment.
This can cause the buyer to lose a significant amount of negotiating ability, by being perceived as a weak rather than a strong buyer. This is why it is very important to get a full loan approval in advance and provide a written confirmation of the loan approval when the offer is made. This shows it is a done deal and you are perceived as a cash buyer.
Now that you have all this information it is time to decide on the property you will like to own. Make a list of what you would like to have, what you must have and what you are flexible on and can live without, where are you planning to buy and how far out of the ideal location you are willing to go to get a little more of what you want.
Be realistic, you know your budget, make sure you do not over extend. If you are living in a 2 BR apartment paying $800.00 a month and have budgeted for $1,500.00 for a mortgage on a 4BR single family home, that may not happen, much depends on your local market.
Now you are ready to find a good real estate agent, the same rules apply, review the testimonials and find one who will work for you and not the seller. Being commission based compensation, the higher the price the higher the commission. In today’s slow market the sellers are offering thousands in bonuses to the selling agents, is your agent pushing such properties or really looking out for your best interest? I wish you the best of luck in fulfilling your dream of becoming a home owner.
I hope with this information, you are better equipped to make the right decision. If you need to learn more, visit our Free Reports and browse the additional resource we have waiting for you.