At a house-warming party I attended, word somehow spread that I am in real estate.
Within minutes, I was surrounded by recent home buyers willing to share their nightmarish stories. Some were amusing; others, though, were pretty disturbing.
The home-buying process can be less mysterious and less stressful if you’re familiar with the process.
Here are some tips to help you get through everything from pre-qualifying for your mortgage to selecting the members of your settlement team:
●Obtain your credit reports from all three major credit reporting agencies. If you have not reviewed your credit recently, you should do so even before speaking to a lender. Know your FICO score. FICO stands for the Fair Isaac Corp., which is a company that uses proprietary algorithms to reduce your financial life to a three-digit number between 450 and 850. The higher the number, the better your credit and the better your interest rate and terms.
You can purchase your FICO score online at www.myfico.com. But beware of the “free” credit reports, as they always have strings attached. Similarly, the credit reports you can acquire for free under federal law at www.annualcreditreport.com do not include the all-important FICO score.
●Obtain a solid pre-qualification letter from a reputable lender. Before you go out home shopping, know how much home you can afford. Contact an experienced, independent mortgage loan officer who is known and respected in your community to provide you with that number. In determining how much home you can afford, your loan officer will rely not only on your FICO score but also your income, cash available for down payment, other assets and liabilities, and items in your credit history, such as bankruptcies, late payments or other events, that hurt your creditworthiness.
Your goal is to obtain a “solid” pre-qualification approval letter from that lender. A solid pre-qualification letter will state that the bank has reviewed your credit score and reports, has verified your employment and cash for your down payment, and is willing to loan you up to a certain amount. There is no magic formula for finding the right lender. More than just interest rates and fees are involved. You will be working with this person for some time and need to be convinced that he or she will be able to get the loan approved and funded in a timely manner. The best way to find a good lender is to simply ask other real estate professionals such as real estate agents, your attorney or accountant to see who was happy or unhappy with their loan officer and why.
●Select one full-time, experienced Realtor with whom you get along. Armed with a legitimate pre-qualification letter, you are ready to start working with one agent. It is critical that your agent be highly accessible, experienced, Internet savvy and, most important, someone with whom you enjoy working. If you find him to be a curmudgeon, your seller and his agent might also, and that might work against you if there are competing contracts for your dream home.
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