Preparing to jump into the buyer pool in 2012? Below are Ilyce Glink’s tried and true steps. Ilyce is the home Equity Blogger from CBS Money Watch. Her advice is spot on. Steps 1-3 are just good financial practices. I think number 4 is the most important, and not because I am a realtor, but because the team you chose to surround yourself with to advise you in the biggest purchase of your life is paramount to a successful and profitable transaction. Oy!..I could tell you stories about mismatched home buyer teams, and I probably will.
1. Pull a copy of your credit history and credit score. Mortgage lenders have become extremely conservative and restrictive in deciding which mortgages will get funded. Lenders will pull credit scores from each of the three credit reporting bureaus (Equifax, Experian and Trans-Union) and then use the middle score to determine your loans interest rate and terms. You need to know that information ahead of time. Go to AnnualCreditReport.com and receive a free copy of your credit history and then pay for your credit score (about $9). You can also go to each credit reporting bureau or MyFico.com and purchase a copy of your credit history and score, if you’ve already used up your freebies.
2. Practice good credit behavior. Lenders regard borrowers with credit scores above 780 as their best customers. Unless your credit score is above that level, you should work on eliminating any errors, and practicing good credit behavior so that your credit score rises. The best thing you can do? Pay your bills on time and in full each month. The next-best thing you can do is maintain four open and active lines of credit. Each credit reporting bureau offers good credit behavior tips for free on its website, or you can go to MyFico.com. (Full disclosure: I contribute real estate posts to the Equifax Finance Blog, where Equifax’s credit experts blog about credit trends and information.)
3. Shop around for the best loan. Even though the federal government is backing more than 90 percent of all the loans through Fannie Mae, Freddie Mac, FHA, VA and USDA, it pays to shop around. Make sure you talk to at least four or five lenders before you sign your application, including a “big box” lender, a small local lender, a credit union, a mortgage broker and an online lender. Use the information you glean from each lender to negotiate a great deal for yourself. Yes, you are allowed to negotiate with lenders and ask them to give you a better deal.
4. Create a great home buying team. Whether you’re buying investment property or a home to live in, you’ll want to create a team of real estate professionals who can help you find the right property, at the right price, on the right terms, without any headaches. The team should include a great real estate agent, mortgage lender, real estate attorney, tax preparer (with experience in investment real estate if you plan on buying real estate as an investment) and real estate inspector to start. Residential real estate investors will want to add a 1031 exchange professional and commercial inspector (if appropriate) to the mix.
Having the right team in place will go a long way toward making your dream of homeownership come true.
by Ilyce Glink, RE journalist, home equity blogger @ CBS Money Watch