Before You Buy a Home

Many potential home buyers envision the process of buying a home as a simple one: Talk to a real estate agent, make a loan application, find a house, sign a contract and wait for closing. This is just the tip of the iceberg, as most experienced buyers will tell you. These steps are critical to the process, but there are many more which must be taken before you take residence in the home of your dreams.

A REALTOR® can guide you through this complicated process, making sure you don’t stumble on any one step. You can help your own cause as well by doing your homework in preparation for what could be the largest purchase of your lifetime. Here are some issues that if addressed could greatly expedite your transaction:

Find out beforehand what’s on your credit report so you can clear up any smudges or errors long before you’re negotiating for a loan. You don’t want to be in the middle of buying a home when you find out your credit report contains errors that can take months to clear up. You can find out how your credit report looks by contacting any one of the three national credit repositories: Equifax at 1-800-685-1111; Experian (formerly know as TRW) at 1-800-392-1122; and Trans Union at 1-800-916-8800. There will likely be a minimal charge, but it will be worth it.

Know the difference between being pre-qualified for a loan and being pre-approved for one. Being pre-qualified simply means that the lender has told you how much of a mortgage you can afford, based on your current income and debts. Being pre-approved, on the other hand, means that the lender has underwritten and approved your loan request, generally speaking, subject to appraisal of the property being purchased.

If you’re depending on a generous relative to provide you with a gift of money for a down payment, you may still need five percent down payment of your own funds. The lender will require you to have receipt of the gift funds prior to closing as well.

While you’re waiting for closing, avoid running out and buying a new car, making other expensive purchases or changing jobs. These are all critical areas. Most lenders check your credit report not only at the time of your loan application, but also just before closing. A major purchase directly before closing could disqualify you for the agreed-upon loan amount and force you to start all over in buying a home. A change in jobs, meanwhile, would mean your lender no longer has a history of your earnings with a particular employer, jeopardizing your loan.

Make sure that the sales contract spells out, in writing, everything for which the seller is responsible. That also means that you should write out in the contract any repairs or other items the seller has agreed to make. Follow up with your REALTOR® on the progress of these repairs because if you don’t, they may not be done in time for closing. And at that point, the seller has the upper hand in negotiating – it’s much more difficult to force the seller to do something if he’s already moved out of the property.

These are but a few of the areas where you can help your own cause. All in all, the best thing you can do is acquire the assistance of a REALTOR® when searching for a home.