Are you waiting out the real estate market, sitting on the sidelines just watching and waiting? Are you waiting for the best possible time, when home prices are as low as they’re going to get and interest rates are still low? Don’t just wait. Use this time to get ready so that you can move when the time is right. There are many possible hurdles and snags in the complicated, time consuming process of buying a home. Some of them could even stop you from getting the home you want. Take the time now to find out where you stand and clear up any roadblocks.
Qualifying for the mortgage is by far the most difficult part of buying a home. There are things you can do now to greatly increase your chances of getting a loan when you’re ready.
Clean up your credit. Get a copy of your credit report from each of the three major credit reporting agencies. If you’re willing to pay a fee, there are many services that will do this for you. However, if you contact the credit reporting agencies directly they’ll give you a copy of your credit report for free. Get copies of credit reports for yourself and your spouse, or whoever you’re planning to buy a house with.
Review your credit report for errors. If there is any incorrect information on a report, write a letter to the credit reporting agency explaining that the information is incorrect. They will contact the creditor for a response. This process takes time, so get it started now. Don’t just do it with one credit reporting agency. Go through this with each of the three. When you apply for a loan, the lender will request a credit report from at least one of three credit reporting agencies, but it’s their choice which one(s).
Make sure you bring all accounts current and make all payments on time. If there is a blemish on your record, it will count for less as it ages. Going forward, make sure that your payment history is spotless.
Don’t open new accounts and try to decrease the balances of old accounts. Having too many loans can bring down your credit score, even if you always make your payments on time. Wait until after you’ve bought your home to make any major purchases that require a loan, like a new car. Car loans are much easier to get than home loans.
You’ll need a solid employment history to qualify for a home loan. Lenders want to see that you are steadily employed in the same field for at least two years. If you have plans to make any major changes – like switching careers or going into business for yourself – you might want to wait. It’s okay to switch from one employer to another, as long as you’re working in the same field.
Start saving up to pay for closing costs and a down payment. This step will probably require a chat with a mortgage broker or some online research. Most people want to buy the most house that they can afford. When you find out what kind of payments you can qualify for, then you’ll know what price range of house you’re looking at. Also, the percentage of the purchase price that you’ll need for a down payment can vary widely depending on the type of loan you’re getting. If you can get an FHA loan, you may be able to put as little as 3.5% down. You may be able to negotiate for the seller to pay some or all of your closing costs, especially if you buy a new home from the builder. Figure about 3% of the purchase price for closing costs.
As you can see, improving your credit and saving up money take time. Getting started now will put you in the best position possible so that when you think the time is right to buy a home, you’ll be able to move quickly.
Many new home builders are offering to pay closing costs. Check out these San Marcos new homes, where you can get $10,000 towards closing costs or upgrades. Find more information on improving your credit score.
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