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How To Start The Home Buying Process!

This is my first time buying a home. Where Should I start?

 Thinking about buying a home? It can seem daunting to start the process definitely if this is your first home. So where is the best place to start? Getting Pre Approved! It’s as simple as…

1. Figuring Out How Much You Would like to Borrow

First, you might want to make sure you’re realistically estimating the amount you’ll need. Borrowing more than you need might not be a great idea, since you’ll be paying interest on the lump sum you take out.

On the other hand, you wouldn’t want to borrow less than you need, only to end up resorting to using a credit card to make up for the difference. Be honest with yourself and your lender, and work with them to find the amount, interest rate, and term that works for you.

2. Checking Your Credit

Although different lenders can use various scoring models, you might want to pull your current credit score and assess how strong it is (generally, a FICO® Score above 740 is considered very good—and above 800 is “exceptional”—but broadly, many lenders consider a score of 670 or above  to indicate solid creditworthiness). This might be one of the main factors lenders consider when considering you for a personal loan, so it’s good to know your score.

3. Getting Pre-Qualified

Many lenders these days allow you to quickly see if you pre-qualify for a loan. This process could show you how much the loan would potentially be approved for, what your repayment terms and your interest rate could possibly be.

You’ll often provide basic information such as your address, income, and Social Security number. Often, lenders may do a soft credit check at that time that doesn’t affect your credit score1.

Once you see a pre-qualified quote from a couple different lenders, you could compare the interest rates and monthly payments you’re offered before choosing the best option for your needs. Also, when you’re comparing lenders, you might want to keep an eye out for any hidden fees, such as origination fees, prepayment penalties, and late fees.

4. Submitting Your Application

The final step is to apply for the loan. Each lender has their own requirements for documentation and qualifying.

You have began the process! Now what? Well..

You’ve done everything right so far; you’ve found a great lender, received a pre-approval and submitted your loan package for final approval. Now you’re done, right? Wrong. Until you close on your new loan, it’s more important than ever to keep your credit steady; most lenders perform one last credit check right before they fund and a decline in your score can mean the difference between getting the home and losing the loan.

Things You Should Never do After Applying for a Loan

• Don’t Change Jobs – While sometimes it’s unavoidable, especially if a new job is the reason for the move, but any change in income or job status creates risk and should be avoided if possible.

• Don’t Make any Large Purchases – As tempting as it may be to go shopping for new furniture, wait until after you close to make any large purchases. This applies to furniture, appliances and even new cars. New loans could change your debt to income ratio and cause you to no longer qualify for the loan.

• Don’t Apply for New Credit – Every time someone runs your credit report, your score is affected. This is not the time to search for a new credit card.

• Don’t Close Any Credit Accounts – It might seem counterintuitive, but closing or paying off loans or credit cards might actually bring your FICO score down.

The length of time you’ve had your credit open is a positive effect on credit scores. The bottom line is to avoid doing anything to your credit. If you’re unsure of what you can or cannot do, ask you lender; they can guide you in the right direction and make sure you close on your new loan.

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Our agents write often to give you the latest insights on owning a home or property in the local area.