- Clarify your reasons to buy. Because it is such a
weighty commitment, buying a home shouldn't come with regret or second
thoughts. Before you buy or even begin the process, make sure that your
reasons and resolve to buy a home are clear and firm.
- Get your financial house in order. It's hard to have
any idea about how much home you can afford if you don't know how much
of your money you want to devote toward housing. If you haven't done
so already, thinking about buying a home is a perfect reason to get
your finances in order.
- Check your credit history. Even if you aren't going
to buy a house, this is a good idea. If your credit report has mistakes
or other blemishes, your credit rating will suffer. As a result, you
will hurt your chances of securing financing and will probably pay higher
interest rates or possibly not be able to secure financing.
- Figure out how much home you can afford. Getting
an accurate estimate of what priced home you can afford will make your
search more realistic and efficient. It may even give you cause to reconsider
- Get pre-qualified. When preparing to buy a home,
you estimate how much home you can afford. Now it's the lender's turn.
Using financial information that you provide, pre-qualification is a
lender's analysis of your general position as a borrower, or in other
words, an estimate of what you can afford. Getting pre-qualified gives
you an even clearer understanding of what home you will be able to afford,
and a pre-qualification letter from your lender helps strengthen your
position with sellers in the early stages of negotiation.
- Shop for loans. Finding a good loan is probably the
most confusing part of the process (and definitely the dullest), but
since it will dictate how much your monthly payment will be, it deserves
your full attention. To simplify, your job is to decide what kind of
loan you want, whom you want to get it from and how long you want the
term to be (most are either for 15 or 30 years).
- Get pre-approved. When you get pre-approved, a lender
gives a firm commitment to loan you up to a set amount without knowing
the specific property. It's particularly useful because when you make
an offer on a home, waiting for financing won't jeopardize your offer.
Once you are pre-approved, closing the loan is quick, depending only
on a satisfactory appraisal and title report of the home. To get pre-approved
you apply for a certain purchase price, loan amount and loan program,
but these assumptions can change after you're pre-approved.
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