You are ready to take the next step. You have decided you are ready to buy a home. Before you open up that web browser and tackle the home listing websites, there are a few things you should be doing.
Here are five things you should know so you don’t end up saying “I wish I would have known that before buying a home.”
The credit score is a direct reflection of your credit history, which is a financial inventory of things you’ve paid for. Credit cards, past loans, government information are all sources that make up your history. Other information includes the number of credit cards and loans you have and if you pay your bills on time. For some of those with poor credit, obtaining a loan will not be possible. But for the majority of future homebuyers, examining your credit standing will guide you toward better terms. Your home loan professional will help you understand what you need to work on to boost your credit score, and in the end, land a favorable loan.
A pre-approval on a loan will give you an advantage when you find your perfect home. You will know the exact loan amount you qualify for, what your monthly payment will look like and how much taxes and insurance will be. With a pre-approval, the loan process will be smoother and your offer will be stronger. Without getting pre-approved, you will be at a disadvantage and may not get the home you are looking for. When pre-approved, a lender provides you with a letter confirming the specific loan amount you can expect to be approved for. Presenting a pre-approval letter along with your offer when you find the home of your dreams will allow you to make the strongest possible offer.
You can purchase a house with as little as 3 percent down, but it carries with it mortgage insurance. Mortgage insurance, which is also known as Private Mortgage Insurance or PMI, is generally required when a homebuyer purchases a home with a conventional loan using a down payment less than 20 percent of the home’s purchase price. This adds to your monthly payment. If you put 20 percent down, there is no PMI requirement.
There are programs available to help borrowers with a down payment. One of APM’s loan programs, titled the Home Buyers Gift Advantage, allows you to use gift funds for 100 percent of your down payment. Gift funds can be used on a conventional or conforming fixed loan.
Some home buyers may decide they want to enter the housing market without a real estate agent. They soon find that there is a lot that goes into the house hunting process – from the research, to the paperwork, to the negotiations, it is a long, tedious process. A good real estate agent has a keen understanding about neighborhoods, recent sales and listings, trends, crime rates and schools. A real estate agent will find listings tailored to your needs and will understand the lending environment. Real estate agents will help you with price negotiations in the current market and protect you by conducting property inspections.
Consider getting inspections on the home you are interested in done early to find out if there are repairs needed. This can be beneficial when trying to get a 30-day close. If an inspection is out of the way there is less chance at any delays later in the closing process. Some market sellers are getting inspections done earlier and earlier to avoid delays.
There is a lot to wrap your head around when buying a home. Make sure you are aware of these things so you are prepared. And if you have questions, don’t hesitate to contact us.