There are many economic and market forecasts and predictions, however the bottom line is if you want to buy your first home—there is no wrong time. There is because the motivation to buy is not determined by regional market conditions or by location.
Industry opinions, economic reports and investor speculation do not sway or predict when a particular individual will be ready to buy. For the great majority of folks, the most compelling reasons to buy a home are based on individual circumstances and personal needs. Some of these factors are:
Family needs and desires for children/parents/in-laws/couples
Convenience to home, work, school, social activities
Sense of achievement or fulfillment
Freedom and independence
Sense of security and privacy
Even though there are many changes in the market, both up and down—people still need and want to buy homes. This desire to buy a home is deeply rooted in the fabric of our national consciousness. The intrinsic value of homeownership—defined as worth based on perception of value--gives far more satisfaction than ROI calculators can quantify.
Today, there are many different loan programs with flexible terms to fit all buyers. There are condos and manufactured homes to close the affordability gap. For future buyers with blemished credit, there are many debt reduction and counseling programs to help gain a fresh start.
Most of us, at some time or another, have done something to adversely affect our credit rating, perhaps without even knowing it. A late or missed credit card or home mortgage payment is just one example.
When you buy a home, your real estate agent will encourage you to get pre-approved for your mortgage. It's during the home loan application process when problems often come to light.
There are three major consumer reporting agencies (CRAs), or credit bureaus, that mortgage companies use to assess a buyer's credit rating: Experian, Equifax and Trans Union. Credit scores typically range from 300 to 850. For home loan purposes, a score of 650 or higher generally indicates a good credit history and will make it easier for you to secure a mortgage.
If your score falls between 620 and 650, your borrowing capability will be examined more closely. If you rate below 620, you may have a credit crisis.
When you're in the market to buy a home and discover that you have bad credit and your score is low, don't despair. Although it may delay the purchase of your home, there are ways to repair your bad credit rating so that you may still qualify for a home mortgage with a decent interest rate.
To evaluate your credit rating you'll need to obtain copies of your credit reports from the various agencies. Examine them carefully to see what transactions are lowering your score.
Charge-Offs: Charge-offs appear on your credit report if a creditor has given up trying to collect from you and ends up writing off the amount you owe as a bad debt. Charge-offs are one of the main reasons why loan applicants are denied credit. How to Repair It: If you have any charge-offs, contact those creditors immediately and make arrangements to pay off the old debt. After a few months of regular payments, or if you repay a charge-off debt in full, submit a written request to that creditor to change the status on your credit reports.
Late Payments: Late payments may be handled differently depending on whether they are isolated incidents or recurring problems. How to Repair It: If you have a single late payment listed on your credit report, the best thing to do is contact your creditors by phone to discuss the situation. Follow the conversation with a written request to have the isolated late payments removed from your reports. If you're consistently late with payments, however, repairing the problem is a little more involved. You'll need to begin by setting a pattern of paying on time over several months. Once this positive pattern is established, call your creditors (and follow-up in writing) and let them know that you're back on track. With persistence and patience, you may be able to delete these score-lowering marks.
Reporting Mistakes: Sometimes, creditors just make mistakes when reporting to the bureaus. Such mistakes might include charge disputes that resulted in an initial late payment that was eventually reversed. Unfortunately, it's the individual's responsibility to spot - and repair - reporting mistakes that lead to bad credit. How to Repair It: Once again, contact your creditor by phone and follow up with a written request that the mistake be corrected.
Because the Fair Credit Reporting Act (FCRA) requires that credit agencies and their information providers investigate reports of inaccuracies, you'll also want to contact the CRA directly to report the discrepancy.
As you work on repairing your credit rating, there are other things you can do to improve your score:
Make sure that you pay all of your monthly bills on time. Avoid opening new credit card accounts, including department store cards Work toward paying down your unsecured debt, but keep accounts open even if you pay them off. Pay cash for the things you need instead of charging them.
If, after all your work, you still score below the 620 mark, it doesn't mean that you won't qualify for a home loan. It may mean, however, that your mortgage will take longer to process and the terms and interest rate may not be as good as you were hoping for. Talk to your real estate agent about referrals to high-risk lenders.
Repairing bad credit can take many months to a year or more. But when you're ready to buy a home, you'll be glad you took the time to improve your score - and your mortgage payment will be lower because of your efforts.
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Once you have located a property that meets your needs, arranged your financing, you can make an offer based on the listing price, along with comparables information and other market considerations. Your professional real estate agent can work with you to determine the best price, along with any contingencies for the sale.
Some strong purchase offers include:
Short contingency removal periods
Short escrow periods
Increased deposit
Love letter from buyer (tell the sellers how much you love their property!)
Pre-approved letter from lender guarantee for purchase price
It is good to get an independent home inspection, so that you can know what the potential pitfalls and future maintenance needs may be. Your offer may be accepted as-is; you may face a counter-offer from the seller, or you may be rejected. In a seller’s market, you may find yourself bidding with several other buyers for a single piece of property. Work with your real estate agent to determine what is customary in your area. This is when his/her negotiation skills really come in handy!
Once your offer has been accepted, you will enter an escrow period, where all of the title research will be handled, funding requirements met; tax and title transfer paperwork managed. Prior to the close of escrow, you will sign all of your finance paperwork, and pay your remaining deposit and closing fees. After funding is complete, the title company will record the new purchase deed with the County Recorder’s office, and you will officially “close” and get the keys to your new home!
When you are searching for the home you will live in, make sure to review the floorplan to make sure that it meets your short term needs. Envision yourself (along with your family living in the home).
What are the key points of consideration for your home? If you spend a lot of time in the kitchen, then you want to make sure that the kitchen can accommodate your habits.
You will also want to evaluate the commuting distances to your place of employment, along with distances to schools. If anyone in your household will use public transportation, you will need to take note of the available transit options.
How far is the home to grocery shopping, movies, theaters, or churches? Are there parks and recreational facilities nearby?
If you will be working from home, make sure that your home office setup will work. Make sure that all of your telecommunications and electrical needs can be met. Is the backyard adequate for your family? Do you need a garage? Are you willing to make major repairs to the home?
Does the style reflect your taste?
Can the home grow with you over the next 5 years, 10 years or 30 years? If you don't plan to be in the home for a long period of time, then certain aspects of the home may not concern you, such as extended stairs or location from other amenities.
In the meantime, make sure to factor in all of your day to day living concerns when you find that house you will call home!
First, you must determine that you want to buy a home. Sounds simple, yet many people find that getting started is the hardest part. There are perceived obstacles in the minds of many would-be homeowners:
Can we save enough money for the down payment? How can we get out of our current lease? Where can we afford to live?
The goal is home ownership, and there are many steps to reach the goal. You may not be financially ready yet, but you need to ascertain where you are NOW in relation to your goal.
Get your finances in order. Accurately determine your financial situation and review your credit profile to determine how a potential lender will see you. Look at all of your available assets for your down payment and examine all of the finance options available to you. If you have some credit blemishes, take the time to make timely payments to your creditors to present the best financial picture to your home lender. Make sure that you have a track record of stability in your employment history. Postpone any major purchases such as cars, motorcycles, or large appliances until after you close escrow. Your actual home purchase may still be 12-18 months down the road, but you can still prepare for it now.
Get pre-approved for your mortgage. Once you’ve cleared the financial hurdles, talk to your lender or broker to find out how much you can afford to borrow along with the expected out-of-pocket costs you will need to incur for the closing. This will include the required down payment (if necessary) along with funds for closing costs, which can run 3-4% of the purchase price. Pre-approval also allows you to shop for a home with an accurate price range. If you are buying in a seller’s market, you may want to search for homes that are considerably below your approved price range, so that you can have the most room for negotiation.
Find a credible licensed real estate agent. Look for an agent that can work with you based on YOUR needs and your schedule. Evaluate references of previous clients and make sure that he or she is responsive and available to you.
You may not know exactly what you want in terms of a new home, and your agent should work with you to determine your needs and help you find a property that meets your immediate and future needs. Your agent should be familiar with the area where you plan to move. Talk to your family and friends for successful agent referrals. Ask them how satisfied they were with his/her services and if they would use them again.
Become an informed and practical buyer. Once you determine where you would like to live, determine what factors are most important for your family. Calculate your new commute time and research school information for your children.
You may want to consider the proximity to a place of worship and shopping in the area. Make sure to evaluate the surrounding factors that are most important to you, along with factors that are least important.
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