Newbie Homebuyer Help
If thinking of buying a home in 2018, November and December are the perfect time to “warm up” for the house hunt so you can hit the ground running in the new year. Read on to learn what to look for at an open house, how find a real estate agent and mortgage lender, and more. There’s plenty to do so let’s get started!
1. Check your credit score
Good credit is like gold when obtaining a mortgage. Typically, you’ll get the best interest rate on a loan if your score is 740 and above. A higher credit score should net you a lower mortgage rate, and that lower rate can mean saving thousands of dollars per year. If you don’t have good credit, start repairing it. Start paying all your bills on time, don’t open up new lines of credit, and correct any errors that might be on your report. One tip is to not max out your credit card each month, it’s best to use 30% or less of your total available credit.
2. Show lenders stability!
Taking a new job or losing your job doesn’t affect your credit score. However, if you have a spotty employment history, lenders may hold that against you in making a loan. Dips in income may signal that it could be difficult to pay bills in a timely manner.
3. Don’t open new credit cards
Resist opening new credit even if you can save 20% or more on a purchase! Resist even over the holidays, don’t make big purchases! It may hurt your chances of getting a mortgage, or at least of getting the best rate on a loan. That new credit line, and what is borrowed, can change the application numbers and jeopardize the application. What could save you a few dollars now could cost you far more in the long run if your mortgage payments will be higher.
4. Save, save, save
Besides the mortgage loan, you’ll need a lot of cash for the down payment, the closing costs, moving costs, and unexpected repairs and fees. Save your tax refund, it’s also a great way to add to your cash reserves for a down payment. Use the Affordability Calculator to see how much house you can afford: https://www.discover.com/home-loans/affordability-calculator/
5. Keep an eye on interest rates
If you hear that interest rates are at historic lows or that interest rates are on the rise, you should not assume that you can get the rock-bottom rate. Not everyone gets the same interest rate on a mortgage loan. It depends on your financial picture and on the lender you choose. Shop around for the lowest interest rates with different lenders, and discuss with your real estate agent on how to keep closing costs down.
6. Find a mortgage lender
Before you even start looking for a home online or in person, look for a mortgage lender to find out if you can afford to buy a home. A lender will ask for your income, your savings and investments, and tell you how much they can lend you and tell you the price range of the homes you should be looking at. If you have a bank you’ve been with for years, start with them. Real Estate agents also partner with lender so find out what they offer, costs, points, and how long to close. Once you know how much home you can afford, perform your home search based on your pre-approval amount or less. Later, lenders can arrange for an appraiser to provide an independent estimate of the value of the house you are thinking of buying, as well as arrange for a title company to handle all of the paperwork to double-check that the seller is the rightful owner of the house you’re buying.
7. Get pre-approved!
When a lender pre-approves you for a mortgage, sellers and real estate agents start to take you seriously! Here’s how to get pre-approved, begin to compile your papers together:
⁃ Tax returns for the past two years
⁃ W-2 forms for the past two years
⁃ Paycheck stubs from the past few months
⁃ Proof of mortgage or rent payments for the past year
⁃ A list of all your debts, including credit cards, student loans, auto loans, and alimony
⁃ A list of all your assets, including bank statements, auto titles, real estate, and any investment accounts
8. Interview real estate agents
You owe it to yourself to shop around. Look for an agent who is knowledgeable, good, integral, and can assist you in reaching the goal of homeownership. Make sure they are aware of how to do a specific transaction. The end of the year is usually a slow time for agents, so chances are they’ll be more accommodating to making an appointment on your schedule. Agents can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. Their knowledge of the home buying process, negotiating skills, and familiarity with the area, comparable homes in the same neighborhood, property inspection, the escrow process, and more. An agent can be an extremely valuable partner! And best of all, it doesn’t cost you anything to use an agent – they’re compensated from the commission paid by the seller of the house. In need of a partner to help you look for your perfect home in San Francisco? Contact Jessie Lee, or go to jessieleesf.com to learn out about her qualifications, achievements, experience, and expertise in the San Francisco market. Jessie has a reputation for great work, an extensive knowledge of San Francisco’s neighborhoods, is trustworthy, will be your advocate and negotiate the best terms, and will represent your interests in every step of the process.
Source: Trulia, Discover.com