Getting Started

As with so many things in life, getting started in buying a home can be a conundrum. Should you start by getting a loan? See the weekend’s Open Houses and find the right home first? Ask a realtor to show you the home you fell in love with when you saw it online? Is getting started a chicken-or-egg thing? Not really.

First Check Your Standing

Before doing any of these things, I recommend checking your credit score, ideally your FICO score. Yes, there is more than one type of credit score and most mortgage lenders use your FICO scores from each of the 3 major credit bureaus. You may find that you have a credit score below, say, 700. Not to worry, you can boost it by paying down your credit card balances. Better yet, paying them off will give your score a greater boost.

While you are at it, make sure you don’t have any surprises on your credit report. Perhaps you leased a phone once upon a time. Now that phone company shows you as failing to pay the monthly lease payments as well as failing to return the phone. Maybe your cable or ISP provider shows you as still owing for the last month of service before you moved. Whatever the case, take the time to get to the bottom if this error and have them correct your standing.

Find A Lender

There are many lenders and even more loan choices out there. This is particularly true for people with good, solid credit histories and scores. So start by finding a lender who is willing and able to answer all of your questions. Tell them that this is your first foray into the world of mortgages and that you will need a lot of help. If their reaction is less than enthusiastic, find someone else.

Choose A Loan

When being told of a loan, ask if it is for a fixed interest rate during the entire life of the loan. Though the interest rate is a bit less for an FHA loan, be careful as the required mortgage insurance can never be removed during the life of such a loan. Is there a penalty if you pre-pay the loan? Is there a possibility of negative amortization? (When the loan balance increases even though you are making monthly payments)

Once you have discussed all of this and provided the lender with their required documents, you will get a loan pre-qualification letter telling you how much you can borrow. Once you have a budget, getting started seeing homes and finding the right one for you is a piece of cake. Happy house hunting.