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If you want to purchase your first home or upgrade to a larger home in 2018, it is important to start planning now so you’ll be better prepared for your home search.
1. Review Your Credit Reports
Before you start looking at homes, you should get your finances in order. To better understand your creditworthiness, obtain your FICO® credit score and your credit reports from each of the three credit reporting agencies. You’re entitled to one free copy of your credit report every 12 months from each of the credit reporting agencies, Equifax, Experian and TransUnion. Order your credit reports from annualcreditreport.com or call 1-877-322-8228. Be prepared to provide your name, address, social security number, and date of birth to verify your identity. If you find errors, you should notify each bureau reporting the error.
Credit scores range from 300 to 850 with a higher credit score indicating a lower credit risk. While a score of 700 and higher is generally considered good, you can qualify for a home loan with a lower credit score.
2. Find A Mortgage Lender
Before you even start looking for a home (and yes, that includes online listings) you should look for a mortgage lender. While many people turn to their bank for a home loan, it’s also important to speak with a local lender with a reputation for closing loans on time. The often have access to a wide variety of loan options and should be knowledgeable of any down payment assistance or first-time home buyer programs that your city and/or state offers and the qualification guidelines.
3. Get Pre-Qualified For A Home Loan
Once you’ve found a mortgage lender, get pre-qualified for a home loan long before you start searching for a home. A lender can help to identify any red flags you may have in your credit history that could affect which home loans you are qualified to apply for. Having the time to address any credit issues now, rather than when you’ve found the home you want to purchase, will put you in a better position for your home loan application.
4. Don’t Open New Credit Cards
Don’t be tempted to open a new store card to charge your holiday gifts. Opening new credit accounts may hurt your chances of getting a better rate on a home loan. Instead, give yourself a gift by paying down your credit card debt. If the sales are too tempting, leave your credit cards at home, so you’re not adding more debt. The discounted merchandise that saves you a few dollars now could cost you far more in the long run if your mortgage payments are higher.
5. Suggest Financial Gifts For The Holidays
Most home loans require the home buyer to pay earnest money, down payment and closing costs. Some loan types have strict guidelines regarding how much of your own money must be applied to the down payment, in addition to any monies provided as a gift. Speak to your lender about the best way to record financial gifts, so you do not jeopardize your home purchase.
If you have saved your down payment, there are also other expenses you may not have considered, but you should budget for, including home inspector fee, moving costs, utility deposits for your new home, window treatments, appliances and unexpected repairs.
6. Interview Real Estate Agents
In 2017, 87% of home buyers purchased their home through a real estate agent or broker. Of these homebuyers, 42% of buyers used an agent that a friend, neighbor or relative referred to them. If you can get a referral – that’s great! However, you owe it to yourself to interview a few real estate agents before deciding on the one you want to work with.
7. Reconsider Renewing Your Lease
If you are currently renting, review your lease for an "early termination" clause. It may be less expensive than changing to a month-to-month lease. Discuss your plans with your landlord; they might be willing to let you sign a six-month lease.
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