It’s easier to purchase property than you may think. Start with one foot in front of the other. Now, go forth and be great! But seriously, don’t be afraid to “go for it.”
If you can afford to pay rent, you can afford to buy…because you are already paying someone else’s mortgage.
If you’re a renter, what’s stopping you from taking the plunge? For many people, the idea of purchasing a home proves overwhelming. Take a look at 5 steps that can ease your concerns and help you successfully get into your own home.
Phase 1: Let’s Talk Credit.
Don’t be afraid to check your scores! You get one free credit report per year from The Annual Credit Report. Use it! See what’s on there. Be prepared to print out your results, so that you have the opportunity to comb through all that information. (Remember you can only view it once for free).
Be sure to dispute all incorrect information. Try to contact the companies of any negative items recently added, to see if you can either settle the debt or set up a payment arrangement. If any allow you to make a payment arrangement, go the next step by asking them to remove the debt negatively from your credit report, to reflect that you are actively making payments.
Note: Student loans and the IRS will ALWAYS get their money. If you owe them (or any other government entity), make a payment plan!
Next, check with your bank to see if they offer free credit score monitoring. If not, sign up for Credit Karma. It is totally free. Credit Karma provides scores based off data from TransUnion and Equifax. You can also dispute discrepancies directly from the site. Credit Karma offers a few different tools that can assist you in your credit repairing journey. You don’t NEED to pay a credit repair service to help you “fix” your credit, but of course, you can if you so choose. Just know that you are capable of doing the work yourself…for free.
Phase 2: Let’s Talk Debt.
Anything that you spend money on is considered debt—your regular household bills, shopping, travel, gasoline.
Check your spending. The banks most certainly will.
Typically, they will go back the past 6 months of your statements when you first apply for the loan. Right before the loan is set to close, they will run your credit and check your bank statements again. (So no major purchases)! Debt-to-Income (DTI) is extremely important, when it comes to securing a loan. You can make “good money,” but if you spend most of it, you will likely not be approved for the amount you may really want. Lenders could consider you too high of a risk.
Having additional sources of income can offset the “negative” of spending.
No matter who you are or what you do, if you don’t have it now, work towards having at least one other stream of income. Trust me. Rainy days will come…sometimes followed by black ice, hailstorms, earthquakes and hurricanes. Be as prepared as possible.
Phase 3: Let’s Talk Education.
Now that you’ve analyzed your financials, take a First-Time Homebuyers Class. This course, typically one you will have to pay for, can be completed in a day, or over the course of a few days. (There may be some places that offer the class for free, so check with your real estate agent).
Taking classes geared towards homeownership can be beneficial in a number of ways, including providing you with the most up-to-date home-buying grants or financial assistance programs that may exist in your area.
Phase 4: Let’s Talk Loans.
Just because you have a bank account does not mean you should automatically apply for a home loan with that institution.
If you’ve already chosen your real estate agent, ask them for some suggestions on lenders. Do some homework. Whether your agent referes you, or you find some lenders on your own, reach out to a few different lenders. I would suggest speaking with a major bank, as well as some local institutions. Ask several questions that will help you determine which lender is right for you.
Get pre-qualified for a bank loan before you begin house hunting with your realtor.
Even if you have an agent ready to work for you, it is best that you don’t begin shopping/searching until you at least know about how much you can afford. A pre-qualification is basically where you have a conversation with a lender and they ask you a few questions to determine what you would likely be able to afford. Because the information they are asking for is general, this process should not affect your credit score in any way. You should also not be providing super sensitive information, such as your social security number, during this conversation.
Phase 5: The Final Piece to the Puzzle
In the midst of all of this, find your real estate agent. (Hello, Metro New Orleans and Metro Atlanta Home Shoppers)! Your agent doesn’t have to have a million years of experience, but you do want someone who is knowledgeable, willing to guide you in the right direction, as well as clearly communicative. Communication and comprehension is key in any type of relationship, in order for success.
Follow these tips, and hopefully, you will be moving into your new home in at least 30 days. Drop a comment below to tell us about your experience(s) or if you have any questions. As always, thanks for reading. Feel free to share for #thecoleture!