5 steps to follow before making an offer on a house
Checklist for a more efficient real estate purchase
is different from making other purchases.
You can shop and buy most products the same day, even big ticket items like cars.
This is not the case with a house. The process is longer and each buyer must follow certain steps before looking seriously.
Homebuyers who do the up-front work are rewarded with a better home and .
Planning doesn’t have to be heavy.
With the help of a simple checklist, new home buyers can make an offer on a home that matches their needs and wants without any surprises.
Plan for the future
Being an owner is more suitable for those who plan to keep it for several years.
Real estate transactions are expensive and can take months. Closing costs for home buyers, according to the Federal Reserve, are about 3.5% of the purchase price.
Selling a house costs more, up to ten percent of the selling price.
Young professionals trying out towns or careers may find the location more suitable.
Similarly, individuals can continue to rent if they do not want to spend time or money on repairs. According to the VA, homeowners should expect to spend 14 cents per square foot on maintenance, or $140 per month for every 1,000 square feet of living space.
Look at your life stage and make sure you are ready to stay in one place for a while and ready to maintain the house.
Check your credit report, dispute errors
Your credit score is one of the most important factors in determining your mortgage rate.
About a quarter of consumers have significant errors in their credit reports. These mistakes can cost them thousands of dollars in higher rates and fees.
Since 2005, every US consumer has had access to one free credit report per year from each of the three major credit bureaus, Equifax, Experian and Transunion.
The free reports don’t show credit scores, but they will tell you if the bureaus are reporting late payments, collections, and other derogatory items.
Go through your report and report any errors. Common errors include accounts that belong to someone else, account balances paid, old derogating items that should have been deleted, and collection accounts that do not exist.
Document the errors and contact the credit bureaus to have them removed. Offices must delete items for which no evidence exists within 30 days.
Calculate your maximum monthly payment
There are many affordability calculators available to consumers today.
But these tools don’t know your other goals, your desired savings rate, or your future plans.
Maybe you have an expensive hobby or plan to work part-time when you start a family.
Whatever your long-term goals, formulate the maximum amount you want to pay each month and do not exceed it.
Consider all mortgage costs, such as principal, interest, property taxes, homeowners insurance or HOA dues, and maintenance.
Normally, you’ll start with your current housing costs and increase them if you’re confident in your income and debt management skills.
Mortgage insurers want to make sure your housing costs don’t increase dramatically after buying a home. This is called “payment shock,” and you may find it harder to get approved if the new payment is more than double your current rent.
Choose the right lender
Before you begin your home buying journey, check with mortgage lenders. Contact at least two or three. Ask for a mortgage quote in writing.
Put lenders in competition with each other. Once you’ve received written quotes, ask one lender to beat another’s lowest rate and fee structure. There will likely be several with competitive interest rates and fees.
However, the rate and fees should not be the only things to consider. Pick one you feel comfortable discussing sensitive topics with — your income, savings, credit, and even your marital status. Fees are important, but so are knowledge, professionalism, communication style and work ethic.
Get a written pre-approval letter
To make things go as smoothly as possible, get your home loan pre-approved. Home sellers will respect you for this and will be advised by their real estate agent to accept an offer with solid financing in place.
A pre-approval is different from pre-qualification. When you prequalify for a mortgage, the lender asks you about your debts and income, but does not analyze your documentation. It’s a nice first step, but useless if you stop there.
Pre-approval requires a mortgage application. You complete an application, which may be submitted to an Automated Underwriting System (AUS), which is computerized mortgage loan approval software.
The lender will check your credit report as well as your pay stubs, bank statements and other items the underwriter needs to commit to lending. A pre-approval means that all the buyer needs is a property.
You, the buyer, have been approved and can begin shopping.
Check your eligibility to buy a home
Mortgage rates are low and homebuyers can afford more in today’s lending environment.
Get started now with the pre-purchase checklist so you’re ready to bid on the right home.
The information contained on The Mortgage Reports website is provided for informational purposes only and does not constitute advertising for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent company or affiliates.