Your Guide To Home Ownership
Home ownership continues to be “THE AMERICAN DREAM”, but too many people lack the FACTS to even the first step. The GOAL of this article is to address the misconceptions and provide FACTS to help make the complete process a pleasant journey instead of a complete nightmare.
I am not saying that the process will be without bumps in the road but if you do your best to follow these STEPS it will not only help give you a peace of mind but it will also provide you with the BEST Possible Outcome.
Unless you have the CASH to purchase the home, your first step should address:
Can I Even Get Financing
The majority of Potential Home Buyers wait to the last minute to get prequalified because they assume that they will qualify and therefore only seek the answer to HOW MUCH do I qualify for?
We will break down the biggest pieces of the Mortgage process are:
- Credit (Credit Scores)
- Down Payment
Since your Income is the way Lenders come up with the answer to:
Can you afford the payments?
Your Credit and Credit Scores answer the question:
Will you make the payments?
Your Down Payment is basically:
Your Skin in the game
INCOME: Lenders will ask for you for the following documents when figuring out the income that will be used to come up with a RATIO, based on studies, that determines if you can afford the home. These documents will consist of:
- Last 2 pay stubs
- Last 2 years W2s
- Last 2 years Federal Tax returns
These documents may vary but this list represents the standard borrower.
CREDIT: Even though you may have the income to justify your new home purchase doesn’t mean that you show a history of making payments on time. The Lender will pull your FICO Credit Scores from TransUnion, Equifax and Experian to see how you have made payments on credit accounts that you have established.
Down Payment: This is the amount of money you need to put up as part of the buying process. This represents your Skin In The Game.
STEP 1: Find out your FICO Credit Score.
If your like most people you know your credit score. However, I bet you don’t know that there are over 36 different credit scores. With so many scores what score will your Mortgage Lender use and will it be the same score that your Credit Scoring System shows?
To help you with this I created WWW.CreditScoresandMore.COM. I didn’t create this system to get rich I created this system to HELP people get the FACTS about Credit and Credit Scores.
I have every client I work with visit this website and Complete Step 1.
This website will provide you with more than a credit score:
Next I have my clients Complete Step 2.
As I stated above Mortgage Lenders use the FICO Credit Score when reviewing your credit history. With 3 out of 5 people having inaccurate information on their credit, STEP 2 will give you access to your ENTIRE Credit profile (All 36 Credit Scores). You need to review the Credit Report to see if there is any information on the report that should not be there or if any of the information is incorrect.
STEP 2: Start the Process EARLY and get Pre-Approved
Once you decide you want to accomplish The American Dream and you have reviewed your Credit get Pre-Approved by a Mortgage Professional.
Avoid using companies that do everything online. The reason for this is that there are many areas during this process that can come up during a conversation with your Mortgage Professional. Also, do not apply with those companies that just gather your information and then sell it to 5-10 or more companies. This will only make the process more confusing and can also cause your credit score to drop and in some cases dramatically.
My Top Mortgage Choice:
STEP 3: Find an Experienced Real Estate Agent:
Real estate agents are important partners when you’re buying or selling a home. Real estate 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 you want to live in can be extremely valuable. 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.
STEP 4: Make an Offer and Get Acceptance:
Take as much time as you need to find the right home. Then work with your real estate agent to negotiate a fair offer based on the value of comparable homes in the same neighborhood. Negotiations will begin and the Better your Realtor the Better your chances. Once offer is Accepted the FUN BEGINS.
STEP 5: Home Inspection:
Home inspections cover the house itself, and things like structural issues. A home inspection will also generally include a look at the roof, the heating and cooling system, plumbing and electrical. Since a home inspection is not “exhaustive,” it may not uncover every possible issue. However, home inspections are generally a very important step in the home buying process. Well and septic inspections are generally paid for by the seller, and are most often included in the standard agreement most real estate agents have. This inspection covers the septic system and wells where the home is not tied to “city water.” While some mortgage programs may require specific inspections, they’re not generally a requirement for every mortgage option. However, buying a home without inspections could potentially leave you open for some major issues. Spending a few bucks early in the process could save you thousands down the road.
STEP 6: Mortgage Process
Your mortgage company will need a copy of your contract and will begin the Mortgage process for the loan that you have been Pre-Approved for. As you can imagine, there is a lot of paperwork involved in buying a house. Your lender will arrange for a title company to handle all of the paperwork and make sure that the seller is the rightful owner of the house you are buying.
STEP 7: Home Appraisal:
Lenders will arrange for an appraiser to provide an independent estimate of the value of the house you are buying. The appraiser is a member of a third party company and is not directly associated with the lender. The appraisal will let all the parties involved know that you are paying a fair price for the home.
STEP 8: Close on the Sale
At closing, you will sign all of the paperwork required to complete the purchase, including your loan documents. It typically takes a couple of days for your loan to be funded after the paperwork is returned to the lender. Once the check is delivered to the seller, you are ready to move into your new home!
Premier Financial Serv Inc
Sr Mortgage Consultant
Hear me Daily “The Mortgage Update”
WYLL 1160AM Christian Talk Radio Weekdays at 5:20 PM
Moody Radio WMBI 90.1 FM Chicago