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Make a Game
Plan
Check Your Credit Rating
Even if
you're sure you have excellent credit, it's wise to double-check
at the outset. Ordering a copy of your credit report is easy. Straightening out any errors
or disputed items now will avoid troublesome holdups down
the road when you’re waiting for mortgage approval.
You may
see disputed items, in addition to errors caused by a faulty
social security number, a name similar to yours, or a court
ordered judgment you paid off that hasn't been cleared from
the public records. If such items appear, write a letter
to the appropriate credit bureau. Credit bureaus are required
to help you straighten things out in a reasonable time (usually
30 days).
TIP:
Make sure that any outdated derogatory entries are deleted
from your credit file. Adverse credit information is not
supposed to be reported or included on your credit report
after seven years (except bankruptcy information, which can
be reported up to ten years).
TIP:
Officially cancel inactive credit cards. If you have an
inactive credit card with a $5,000 limit, even though you
owe nothing on it, some mortgage lenders will consider that
a potential future debt. Too many inactive credit cards with
significant credit limits could keep you from obtaining a
mortgage loan. Don't just cut up your extra cards; officially
cancel them, and do it now so there will be time for the news
to reach the credit bureaus.
TIP:
Hold off on making any major credit card or car purchases
while you're waiting to apply for a mortgage. Monthly
payments you're obligated to pay will be counted against you,
and reduce the amount of the mortgage loan you'll be offered.
Even if you've been pre-approved for a mortgage, that approval
is subject to last-minute evaluation of your financial situation,
and a spending spree for appliances, furniture and other goodies
intended for your new home may wreck your chances for buying
it.
Pre-qualification and Pre-approval
on a Mortgage
Any reputable
real estate broker will "pre-qualify" you
for a mortgage before you start house-hunting. This process
includes analyzing your income, assets and present debt to
estimate what you may be able to afford on a house purchase.
Mortgage brokers, or a lender's own mortgage counselors can
also calculate the same sort of informal estimate for you.
Obtaining
mortgage "pre-approval" is another thing
entirely. It means that you have in hand a lender's written
commitment to put together a loan for you (subject only to
the particular house you want to buy passing the lender's
appraisal).
Pre-approval
makes you a strong buyer, welcomed by sellers. With most
other purchasers, sellers must tie the house up on a contract
while waiting to see if the would-be buyer can really obtain
financing.
The down
side is that you must pay application fees to cover the lender's
paperwork in verifying your employment, income, assets, debts
and credit rating. If you later decide not to use that particular
lender, you'd have to start all over again elsewhere - with
no rebate.
Pre-approval
will also speed up the entire mortgage procedure once you've
found the house you want. The only remaining question
will be whether the house will "appraise" for enough
to warrant the loan.
Become an Educated Buyer: Research
Neighborhoods, Read Ads and Visit Open Houses
If you
were changing cities, the standard advice used to be to subscribe
to the local newspaper in the new town and start reading
local news and classified ads to get a feeling for different
neighborhoods.
For local moves, you have the advantage
of driving around neighborhoods that interest you and looking
at lawn signs. Particularly on weekends, you will see "Open
House" postings. Don't hesitate to walk in, even
if you're not ready to buy yet. Visiting open houses is an
excellent way to familiarize yourself with the market and
judge various real estate agents you may meet along the way,
and it won't put you under obligation to anyone.
Your Wish List
Making
sure you end up with the right home involves figuring out
exactly what features you need, want and don’t
want in a home. Before starting your search, you should
make a "wish list" to decide which features are
absolutely essential, which are nice "extras" if
you happen to find them, and which are completely undesirable.
The more
specific you can be about what you’re looking for from
the outset, the more effective your home search will be. Also
keep in mind, that in the end, every home purchase is a compromise.
You can
also begin assessing your finances to see exactly how much
house you can afford...
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