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Check Your Credit Rating
Even if you're sure you have excellent credit,
it's wise to double-check at the outset. Ordering a copy of
your credit report is easy. Straightening out any
errors or disputed items now will avoid troublesome
holdups down the road when you’re waiting for mortgage
approval.
You may see disputed items, in addition to errors caused
by a faulty social security number, a name similar to
yours, or a court ordered judgment you paid off that
hasn't been cleared from the public records. If such
items appear, write a letter to the appropriate credit
bureau. Credit bureaus are required to help you
straighten things out in a reasonable time (usually
30 days).
TIP: Make sure that any outdated derogatory entries are deleted
from your credit file. Adverse credit information
is not supposed to be reported or included on your credit
report after seven years (except bankruptcy information,
which can be reported up to ten years).
TIP: Officially cancel inactive credit cards. If you
have an inactive credit card with a $5,000 limit, even
though you owe nothing on it, some mortgage lenders
will consider that a potential future debt. Too many
inactive credit cards with significant credit limits
could keep you from obtaining a mortgage loan. Don't
just cut up your extra cards; officially cancel them,
and do it now so there will be time for the news to
reach the credit bureaus.
TIP: Hold off on making any major credit card or car purchases
while you're waiting to apply for a mortgage. Monthly
payments you're obligated to pay will be counted against
you, and reduce the amount of the mortgage loan you'll
be offered. Even if you've been pre-approved for a mortgage,
that approval is subject to last-minute evaluation of
your financial situation, and a spending spree for appliances,
furniture and other goodies intended for your new home
may wreck your chances for buying it.
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Pre-qualification
and Pre-approval on a Mortgage
Any reputable real estate broker will "pre-qualify"
you for a mortgage before you start house-hunting. This
process includes analyzing your income, assets and present
debt to estimate what you may be able to afford on a
house purchase. Mortgage brokers, or a lender's own
mortgage counselors can also calculate the same sort
of informal estimate for you.
Obtaining mortgage "pre-approval" is another
thing entirely. It means that you have in hand a lender's
written commitment to put together a loan for you (subject
only to the particular house you want to buy passing
the lender's appraisal).
Pre-approval makes you a strong buyer, welcomed by sellers. With
most other purchasers, sellers must tie the house up
on a contract while waiting to see if the would-be buyer
can really obtain financing.
The
down side is that you must pay application fees to cover
the lender's paperwork in verifying your employment,
income, assets, debts and credit rating. If you later
decide not to use that particular lender, you'd have
to start all over again elsewhere - with no rebate.
Pre-approval will also speed up the entire mortgage
procedure once you've found the house you want.
The only remaining question will be whether the house
will "appraise" for enough to warrant the
loan.
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Become
an Educated Buyer: Research Neighborhoods, Read Ads
and Visit Open Houses
If
you were changing cities, the standard advice used to
be to subscribe to the local newspaper in the new town
and start reading local news and classified ads
to get a feeling for different neighborhoods.
For local moves, you have the advantage
of driving around neighborhoods that interest you and
looking at lawn signs. Particularly on weekends, you
will see "Open House" postings. Don't
hesitate to walk in, even if you're not ready to buy
yet. Visiting open houses is an excellent way to familiarize
yourself with the market and judge various real estate
agents you may meet along the way, and it won't put
you under obligation to anyone.
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Your
Wish List
Making sure you end up with the right home involves figuring
out exactly what features you need, want
and don’t want in a home. Before starting
your search, you should make a "wish list"
to decide which features are absolutely essential, which
are nice "extras" if you happen to find them,
and which are completely undesirable.
The more specific you can be about what you’re looking
for from the outset, the more effective your home search
will be. Also keep in mind, that in the end, every home
purchase is a compromise.
You can also begin assessing your finances to see exactly
how much house you can afford...
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