The Buyer Process

Buying a home is one of the greatest investments you can make -- thus, the more information you know, the better prepared you will be to make smart decisions.  Below is a brief timeline of what to expect during the Buyer process from beginning to end:


ONE YEAR OUT (OR ASAP)

Get Your Credit Reports

Obtain a free credit report from AnnualCreditReport.com. If there are errors on your reports, you will pay a higher interest on your mortgage or you might have issues getting a loan. Scan your reports for suspicious activity, collection accounts for debts you don’t owe and negative marks (other than bankruptcy) that are older than 7 years.

Obtain Your FICO Credit Scores

These are used to measure your credit worthiness. They help determine the rates and terms for your loan.

Consider a Credit Monitoring Service

It provides an early warning if a collector tries to post a bogus debt.

Attack Your Debt

Eradicate bad debt such as credit card balances and payday loans which signal you are living beyond your means. Getting any overspending problems fixed before you buy a home is key.

Save Money

Cut back on luxury expenses and put as much money aside as possible. Ideally, try to have at least a 5% down payment. Putting 10% or more will give you even more financing options.

Switch to Automatic Bill Pay

A single 30-day late payment can knock 100 points off your credit score, so be sure every bill gets paid when due. Consider using automatic debit for payments if you don’t have a reliable bill paying system.

 

6 MONTHS OUT

Research Mortgage Options

Many people have lost their homes in today’s market because they didn’t understand their mortgage or listened to poor advice. Understand the risks of different types of mortgages by speaking to a lender.

Research Home Ownership Costs

It not only includes loan payment, but also involves property taxes, home insurance, maintenance and repair costs, and perhaps homeowners’ association fees.

Hone Your Saving Strategies

Save up for a larger down payment or build up your emergency fund for unexpected home expenses.

 

3 MONTHS OUT

Reduce Your Credit Utilization

Less is better, at least when it comes to the FICO scoring formula. Even if you pay your balances in full each month, the balance that shows on your most recent statement is the formula used. Keep that balance to 30% or lower.

Don’t Open or Close Any Accounts

Until the escrow process is complete and you’ve moved into your new home, avoid actions such as opening or closing credit accounts.

 

2 MONTHS OUT

Look Into Potential Interest Rates

Checking your FICO credit scores doesn’t ding them, so order a fresh set and speak to a few lenders about current rates. (Be aware rates change.) Don’t apply for a loan yet or give permission for your credit to be pulled – just get a feel for what to expect.

Understand the Effect Of Mortgage Shopping on Your Score

Every time a lender checks your credit, a ‘hard inquiry’ appears on your credit report and dings your score slightly. The good news is that the FICO scoring formula counts all mortgage-related inquiries within a specified period as one inquiry. So do your serious mortgage shopping in a fairly concentrated period of time, typically immediately after you enter escrow.

Get Approved for a Mortgage in Advance

Pre-Approval, in which a lender gives a commitment to make you a loan, is different and more valuable to Sellers than a Pre-Qualification, which gives you an idea of an affordable loan amount without any commitment. Even though a Pre-Approval involves a hard credit inquiry, the small potential ding on your credit may put you in a stronger position with Sellers.

Research Neighborhoods and Agents

Check listings (click on above “Listings” link, updated live via MLS), attend Open Houses and identify a professional Realtor to help you in your home search.

 

IN ESCROW

Shop for a Loan

Consider national, local and online lenders. The full approval process typically takes 4-6 weeks, so be sure to move quickly.

Conduct Appraisal, Home Inspection and Walk-Through

An appraisal is required for loan approval. An inspection is not required but can alert you to any serious problems before the deal closes. The walk-through is usually done within 24 hours of close so you can make sure your home is in move-in condition.

Get Homeowners Insurance

Lenders require this coverage and you’ll need proof of it at closing.

Confirm Closing Costs

Costs can include your down payment, your share of legal fees, paperwork costs, property taxes and title insurance.



Source: Title365