10 Home Buying Tips for First Time Buyers
If
you have previously purchased a house, you know what lies ahead.
However, you have questions if you're a young first-time home buyer.
You probably have friends or relatives who are anguished over the
mortgage process. The reason is perhaps due to inadequate
preparation on their part or the failure of the mortgage loan
officer to prepare them properly. So here are some tips to make the
mortgage application and home buying uneventful.
The best advice for first-time house buyers
- Get your free credit report!
- Get your papers in order!
- Get PRE APPROVED-not PRE QUALIFIED
- Find a lender who uses the rapid rescore program in conjunction with a credit simulator.
- Ask the seller about the cost of their homeowner's insurance policy before making an offer!
- Find out if the house requires flood insurance.
- Get an estimate of the closing costs before making an offer.
- Get a home inspection with hazardous substance testing
- Seek out a first-time home buyer program.
- Be careful when shopping for an interest rate.
1. Get your free credit report!
Experian, Equifax, and TransUnion are required by the Fair Credit Reporting Act (FCRA) to provide you with a free copy of your credit report every 12 months if you ask for one. Your credit report is accessible online, and it is quick and straightforward. If there aren't any issues, that's fantastic, but if there are, you'll find out before you go too far along in the home-buying process.
You might think I pay my bills on time; why should I bother?
Any seasoned mortgage loan officer will tell you that erroneous
information and collection accounts are regularly on a consumer's
credit report. Additionally, if there are errors in your credit
report, this might hurt your credit score.
If you have a low credit score, it could be difficult for you to get a mortgage. It is difficult, to say the least, to correct an inaccurate credit report after qualifying for a mortgage.
What should I do if I find incorrect information on my credit report?
Contact the three credit reporting agencies right once to dispute
any erroneous information you see on your report.
Credit bureaus are required by federal law to investigate a dispute
within 30 days.
Directly contact each credit bureau by calling:
| Equifax P.O. Box 740241 Atlanta, GA 30374-0241 (800) 685-1111 |
TransUnion P.O. Box 2000 Chester, PA 19022 (800) 888-4213 |
Experian P.O. Box 2002 Allen, TX 75013-0036 (888) 397-3742 |
EXTRA TIP
Unless the loan officer specifically instructs you to do so, never
cancel or pay off any credit cards, installment loans, or other
debts.
Your credit score is based on various factors, including the amount
of available credit, the number of open accounts, the age of the
funds, and more.
You run the danger of reducing your credit score when you terminate
accounts, which is something you do not want to happen.
Additionally, applying for or opening new credit is a terrible idea.
2. Get your papers in order!
When you make a loan application, the lender will ask you for:
- Your most recent pay stub(s) covering the last 4 weeks,
- bank and savings statements (all pages)
- 401(k) account statements (including the final page for check reconciliation),
- divorce and child support orders (if applicable), and
- divorce settlement agreements (if applicable)
- W-2s for the most recent two years
- Income tax returns for the past two years
The lender will need your employer's name, address, phone number, and employment dates for all employers.
3. Obtain a pre-approval rather than a pre-qualification.
Although the terms pre-approval and pre-qualification are frequently
used interchangeably, they have two meanings.
Pre-qualification means that someone has looked through your
finances (assets, income, and debt) and determined that you are
qualified to buy a property in a specific price range.
Pre-qualification is nothing more than a "gut feeling" that you'll
be approved for a loan.
A pre-approval includes verification of your income, debt,
income, and credit score. The lender will look at your pay stubs,
W-2s, bank records, and credit report.
The pre-approval has the appearance and feel of an actual mortgage
application. The lender will review your W-2s, bank statements,
current pay stubs, and other documents. The lender can assess the
amount you can borrow and which loan program is "ideal" based on
your financial circumstances once you've been conditionally
accepted.
A lender's pre-approval letter outlining your financial
qualifications is typically issued. A pre-approval letter is usually
valid for 60 days.
After 60 days, the lender may request you update your bank
statements and pay stubs. A genuine pre-approval gives you an
advantage over other home buyers when you make an offer, and
Pre-approval implies that you are likely to be approved for a loan.
4. Find a lender who uses the rapid rescore program in conjunction with a credit simulator.
Find
a lender that uses a fast rescore tool and a credit simulator.
After addressing any negative items on your credit report, you may
raise your credit score quickly. Rapid rescoring is a topic that
most lenders ignore since it costs them money.
A few more points may make the difference between getting the loan.
A few issues might significantly impact your interest rate and loan
program on your credit score.
Whether you like it or not, one aspect that affects your interest
rate and, in certain situations, the loan programs open to you is
your credit score. Some lenders may use credit score simulators and
credit rescoring updates to raise your credit score.
5. Before making an offer, inquire about the cost of the seller's homeowner's insurance coverage.
You may be surprised to hear that the cost of homeowner's
insurance might be impacted by an insurance claim made by the
current owner.
You could be required to pay a higher premium due to the seller's
claim if they made one with their homeowners' insurance provider.
Location, age, and architectural style are just a few examples of
the variables that may significantly impact the price of a
homeowner's insurance policy and its monthly cost. Ask about the
insurer and agency the seller uses and how much it will cost to
insure the house.
6. Find out if flood insurance is required for the home.
Did you know that if you own a home in a flood zone, lenders will
require flood insurance?
Did you know that flood insurance costs on average, $750 per year?
Every month, that lovely little creek in the backyard might cost you
an extra $100 on your monthly mortgage payment. Take a few minutes
before making an offer on the house to determine if it is located in
a region that requires flood insurance.
Did you know that if you own a home in a flood zone, lenders will
require flood insurance?
Did you know that flood insurance costs on average $750 per year?
Every month, that nice little creek in the backyard might cost you
an extra $100 on your monthly mortgage payment. Take a few minutes
before making an offer on a house to determine if it is located in a
region that requires flood insurance.
7. Before making an offer, get an estimate of the closing fees.
Before applying for a loan and making an offer on the house, ask the mortgage lender (or lenders) for a loan estimate. A loan estimate is a document that includes a breakdown of all the expenses related to buying a house.
8. Obtain a home inspection that includes a hazardous substance test.
Having
a professional inspect the house is unquestionably in your best
interest. Still, you should also have a home inspection that
includes asbestos, radon, mold, and other potentially harmful
conditions.
You'll pay a bit more for testing but think about the repercussions
if you (or someone in your family) get sick due to a dangerous
condition.
9. Seek out a first-time home buyer program.
There are various programs for first-time home buyers. Some
first-time (and non-first-time) programs provide grants to help with
down payment and closing costs.
Speak to a HUD counselor to assist you with your purchase.
First-time home purchasers can also get help from the Federal
Reserve Banks.
Grants for first-time home buyers are available from the federal
government.
10. When looking for an interest rate, be cautious.
The search for a cheap interest rate or loan program should be limited to a few days.
A "hard inquiry" occurs when a lender views your credit report in
response to a credit application, and credit scores are affected by
hard inquiries.
Applying for many credit accounts quickly can hurt your credit score
and make lenders think you're a riskier borrower.
Furthermore, some credit-scoring models may consider your recent
credit behavior. There is one exception.
If you are looking for a new car, mortgage loan, or a recent utility
supplier, numerous inquiries for such purposes are generally
regarded as one inquiry for a specific period (typically 14 to 45
days, although it may vary depending on the credit-scoring model).
This allows you to compare several lenders and determine which loan
terms are best for you. It's vital to note that this exception
doesn't usually apply to other sorts of borrowing, including credit
cards.
Quick Recap
- Take a look at your free credit report
- Gather up your papers
- Get a pre-approval
- Will your lender use rapid rescore?
- Does the house lie in a flood plain?
- How much is the seller's homeowner's policy?
- Get a loan estimate from your lender before you make an offer
- Get a though home inspection
- Look for first time home buyer programs and grant money
- Be careful when shopping for an interest rate
Conclusion
In conclusion, private mortgage insurance is an integral part of
the home-buying process. It allows buyers to purchase a home with
less money down and protects lenders in the event of a default.
Knowing what it is and how it works can help buyers make more
informed decisions when buying a home. Homeowners should compare
different providers' costs, coverage, and rules before committing to
private mortgage insurance. Doing so can save you money in the long
run and provide more financial security.
SOURCE:
Experian Rapid rescore
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