If you are wondering where to start in buying a home, this blog post is for you. Most people make the mistake of finding a home and then trying to figure out how to buy it. This often leads to disappointment when you are set aside in favor of another buyer who is ready, willing and able to buy the home.
6 Steps On Where To Start
Check Your Credit
The first step is to check your credit to see if it will meet lenders’ requirements. Generally speaking lenders will be looking for no negatives in the last 24 months. Things like missed payments, insufficient payment, car repossessions, charge-offs and the like. These could all stop you in your tracks. Check your credit score at myFICO.com. If you are carrying a large balance on your credit card(s) pay it down. Ideally, pay it off even if it takes several months. This alone will boost your score.
Talk To A Lender
Find out the specific requirements of your lender of choice. Perhaps they are accommodating or maybe their minimum requirements are too high. They may tell you that their minimum credit score is 700, or they may tell you that they have a program for people at 640 or higher. If your first choice of lender can;’t help you, don’t despair. There are lenders willing to go down to 580 and even 550. With a larger down payment. some lenders will even lend for score at 500 or more.
Funds From You
Down payments vary depending on the loan. Additionally, there will be fees and other charges (collectively called Closing Costs) that you need to plan for. Even with grants and down payment assistance, there will be expenses you need to cover. Plan on needing 5.5% of the loan amount or preparing yourself to qualify for one of the assistance programs.
Understand Your Total Monthly Expenses
Remember that you will have more that just interest and principle to pay every month. There will be property taxes, home-owners’ insurance, mortgage insurance is likely. Additionally, there could be Home Owners’ Association dues and even Mello-Roos fees depending on where/what you buy.
Don’t Go It Alone
You may find your neighbor/co-worker/second-cousin/whoever will sell you their home privately. While you may be happy to avoid having to bid against other buyers, the fact is this situation is filled with potential pitfalls. Is the price realistic? With no agent commissions, the seller should be offering a 5 to 6% discount on the price other area homes sold for. Is the seller going to provide termite clearance? Comprehensive disclosures? Any warranty(ies)? What recourse will you have when you find things are not as they seem? All these things and more can happen either because the seller does not know what they are doing or because they are looking for an advantage. Your agent has a fiduciary duty to you. That is to say, they have to put your interests before everyone else’s, including their own.
Whether you need help improving your credit, finding a grant or a home, this is what I do. Get in touch (760 622 5087) and together we will find where to start to own a home.