Understand the Process
Whether a first-timer or seasoned home buyer, your home buying and selling process can be as challenging as learning a new language. Before you make your move, it's important to first understand the steps involved and the buzzwords of the "deal" to ensure the smoothest transaction possible.
Your best source of information will be from your Realtor. The real estate industry and financing are constantly changing, so even if you've bought a home in the past the process may have changed. Friends and relatives are often well-meaning, but they may not have purchased or sold recently either and could be giving you inaccurate information.
So how does this work?
Get prequalified by a lender so you know how much you can afford and how much your payments will be.
Choose a Realtor who will represent you (ask about Buyer Representation). Your Realtor will have access to the Multiple Listing Service and can show you every house in town regardless of which agent or company has it listed.
Once you find a house you will make a written offer. When it's been completely accepted you are officially Under Contract!
Your Realtor will help you schedule inspections, deliver the contract to the lender and review the title commitment. There are a lot of things happening behind the scenes while you are under contract and your agent will be handling the details for you.
Once you've accepted the inspection, title commitment, and survey, and you have loan approval, you will be on your way to closing.
About a week prior to closing you can schedule utilities connections for the date of closing.
Closing typically takes place at the title company. When you go to sign documents, you will need to bring identification (usually your driver's license or passport) and your funds for closing. The funds for closing must be in the form of a money wire or cashier's check - the title company will not accept cash or personal checks.
How-to’s: Understanding Your Credit Scores
When you apply for a mortgage loan, one of the first things your lender will do is check your credit history, but they don’t read through your credit reports page by page. They get a snapshot of your credit called a credit score.
Fair Isaac Corporation is the company that compiles your credit scores based on the information in your credit reports.
You’ve probably noticed the use of plurals – scores, reports. That’s because there are three credit bureaus, along with Fair Isaac, that are under the jurisdiction of the Federal Trade Commission. The three bureaus are called Equifax, Experian, and TransUnion.
The credit bureaus operate independently and each collects its own data about your credit from banks, landlords, credit card companies, retailers, and other sources. Each credit bureau also has its own credit scoring methodology.
When Fair Isaac scores your credit reports, it creates a FICO score that will be anywhere from 300 to 850. The lender buys your credit score and determines how much of a risk you are based on how you handle your other financial obligations.
Credit scores impact your interest rate. According to an example by the Consumer Federation of America and Fair Isaac Corporation, a 720 FICO score can help a borrower qualify for a low 5.5% 30-year-fixed-rate mortgage. A different borrower with a 520 score will pay 8.5% or $2,400 more annually on a $100,000 loan.
*Five areas of your credit can impact your FICO score:
1. Your payment history – about 35%
2. Your debt (how much you owe) – about 30%
3. Length of credit history – about 15%
4. New credit – about 10%
5. Credit mix – about 10%
How to improve your credit scores
Delinquent accounts, high debt-to-income levels, and numerous open lines of credit (credit cards with high limits) can all conspire to lower your scores considerably. In order to keep your credit scores high:
1. Pay your bills on time. Don’t worry if you’ve missed a payment; catch up and stay current.
2. Keep balances as low as possible on your credit cards.
3. Don’t move your credit from card to card. If a credit card company is charging you a higher interest rate than you feel is fair, contact them and negotiate a lower one or pay the card off in full.
4. Don’t open more credit cards than you need.
5. Credit card companies reward their good customers with higher loan limits. If you don’t want more credit with this company, call them and ask them to return you to your previous limit.
Having a high credit score may not only get you a lower mortgage interest rate but it could also speed up your mortgage approval process.