What Do I Need to Know When Buying a House?

Buying a home is a huge accomplishment. But unfortunately, it has become increasingly difficult for many middle class families to afford a home of their own. Still, homeownership is achievable. The key is knowing what to expect, and planning ahead for one of the biggest purchase of your life.

Instructions

1. Know your credit score. There used to be a time when borrowers could get approved for a mortgage loan with bad credit. Those days are over, and lenders now require acceptable credit. Before applying for a home loan, order a copy of your credit report (see Resources). Closely examine the contents, and look for errors and anything that can potentially lower your score. Attempt to lower your debts, and maintain a good payment history.

2. Save for upfront expenses. Although you may be able to buy a home with no money down, lenders require other upfront fees such as earnest money deposit, appraisal fee, application fee and settlement costs. You can include the settlement fees in the mortgage loan. However, this increases the amount you need to borrow.

3. Get pre-approved before beginning your search. There is nothing worse than falling in love with a house you can't afford. Rather than find a house, and then look for a loan, obtain a pre-approval before beginning the search. This way, you know exactly what you're able to afford. A pre-approval is different than a pre-qualification. With a pre-approval, the mortgage lender requests all documentations (tax returns, paycheck stubs and credit report), and determines an affordable loan amount.

4. Learn about different mortgage loans. Although some mortgage lenders continue to push sub prime, interest only and adjustable rate home loans, these mortgage options are extremely risky. Instead, look for a fixed rate home loan. With a fixed rate, your interest rate never changes, and your monthly payments remain the same for the life of the loan.

5. Choose a good real estate agent. A good realtor is attentive and looks for properties that match your "wish list." And more importantly, he won't persuade you to purchase a more expensive home in an attempt to increase his commission. The real estate agent communicates with the seller's agent, and handles the paperwork (bid and counteroffer).

6. Get a home inspection. Lenders don't require a home inspection. However, smart buyers know the importance. Once you sign the loan papers, the property is officially yours. In turn, you become responsible for any minor or major repairs. Home inspectors thoroughly walk through the home and inspect the electrical wires, plumbing, windows, appliances, roof and more.

Resources

• Free Credit Report