
Planning for a Home Purchase; How to Buy a House
Owning a home is an integral part of the American Dream; afforded by the design of our society. The 'American Dream' as coined by James Truslow Adams, allows 'opportunity for each according to ability or achievement’. While nothing comes easy, sometimes we forget the opportunities we have.
Know your credit score.
Your credit score is the basis for most decisions involving financing, a higher score will lead you to better terms on the loan that you are hoping to secure. Before applying for a loan or pre-approval letter, it's smart to pull your credit report and score. Look for any discrepancies or negative items that need to be corrected and ways to increase your score if necessary. With a score between 660-680 you may be looking at a higher interest rate or sizable fees on your loan, below that range is essentially the cutoff point for most underwriting decisions. With a score of 700-720 you should be able to obtain quality terms and a score above 750 will get your preferred rates.
How much house can you afford?
Saving for your down payment.
Get pre-approved.
Plan for closing costs.
Buy a house you love, but don’t get emotional.
Know your additional costs.
Look out for hidden dangers & risks.
A few last items:
- Know that the mortgage approval process is painful. Don’t expect to close sooner than 60 days and be prepared to send and re-send every account statement since the beginning of time. Liquidity is a big advantage; it’s wise to source your funds in advance to the account you will be using to pay closing costs. We had to show additional documentation because I didn’t move funds to the final destination early enough.
- Pay off debt in advance. Your credit usage should be less than 50% of your total available credit.
- Find the right real estate agent, one that will work for you and is not just looking for a transaction. Be wary one who is just encouraging a purchase.
- Watch out for home ownership myths. It’s not always the better to buy than to rent, and homes can go down in value.
- Justin