|When it comes to buying a house, it helps to be informed. There are many first-time buyer questions that need to be asked. After reading this, if you still have a question or concern about qualifying for, getting approved for, and buying a house, please ask it. Our counselors will respond quickly to your home buying questions and get you the information you need to make your real estate experience a good one.
We have over twenty years experience helping first-time buyers go from renting to owning their own home. Put our real estate and home buying experience to work for you and you will be moving into your new home quicker than you may have thought possible.
1. What are the basic steps to buy a house?
Buying a house is not a difficult as many would lead you to believe. While qualifying for and getting approved for a mortgage is more challenging than it has been in years past, you can still own your own home and we will help. Our counselors will guide you. We know what banks are looking for in order for you to qualify. We will help you read, understand and use your credit report and score to your advantage.
Here are the steps you should expect:
- Before you go out and look for a home to buy, figure out how much of a payment you can afford.
- Sit down with a Buy a House professional and take a look at your overall financial picture. Make sure you are in the best possible position to get approved for the most favorable financing available. If it looks like you will need more time, we will show you step-by-step what you need to do in order to get approved and give you a complete written plan. We will be there every step of the way to answer any questions you may have.
- Get your mortgage loan pre-approved with terms you are comfortable with. Now you are ready to start looking at homes to buy!
- Work with either your Realtor or a trusted professional we recommend and using the MLS to find the right house. With your pre-approved financing, and complete understanding of the process, you are armed with confidence and able to negotiate the best terms on your new home.
- Make the offer, finish the financing and close the transaction! We are with you every step of the way!
- Now you and your family can move into the home you've always wanted! We will even show you how to set it up so you don't have to make your first payment for 30-60 days!
2. How will my credit score affect my ability to buy a house?
There are three major credit bureaus in the United States. These bureaus collect and store your credit history, issue you a risk score and then provide that information to potential lenders when you go shopping for your home loan. Banks and mortgage companies will use this information to decide whether you're someone to whom they want to loan money, and determine the rate at which you will have to pay back that loan. Because your risk score so important, your first step is to find out what it is, and find out if and how you might need to improve it.
You can check your risk score online at each bureau:
We can help! Part of the Buy a House service includes finding your credit score and helping you with managing that score. Whether your score is perfect or not-so-perfect, put our expertise to work for you. We can help you to buy a house as soon as possible. Below are some tips and tricks to help you maximize your score:
- Look at total you owe on credit cards compared to the limits of those cards. This is your usage percent, and the lower that percentage the higher your score. A common mistake is to consolidate multiple cards into one new low rate card. This causes your usage percentage to jump up and your score to drop.
- If you have a card that you pay off every month, try to make that payment online BEFORE the end of the billing cycle. This way when it reports it will show a zero balance and raise your credit score.
- If you are having trouble paying your bills, try to minimize the number of accounts that you are late on.
- New accounts will drag your score down, so if you are planning on buying a house in the next couple years, do not open any new accounts.
- Sign up for a service where your credit report is monitored. The last thing you want is to go into the bank to apply for a loan only to find out there's a new collection on your credit by someone else with your name.
- Avoid the 90 day same as cash offers, as they lower your score than other new accounts you could set up.
- Be proactive with medical bills. Even though your insurance should cover them, make sure you keep open communication to avoid any turning into collection accounts.
- Remember that parking tickets and library fines show up on credit reports now - so don't ignore those little bills.
3. Is it true it's almost impossible to get a home loan or mortgage?
While bank underwriting has become more strict since the beginning of the financial crises of 2008, it's not impossible. We at Buy a House are well versed in what the banks are looking for and will help you prepare.
In the past there were stated income loans that allowed you to get a home loan without showing your income. Those programs are gone. When you meet with your Buy a House counselor, they will go over your tax returns and other income documentation to determine what help or assistance you need. It's never impossible and we never tell a customer No and let them leave. We work with everyone, and we will work with you diligently until you are able to buy a house.
4. Should I buy a foreclosure? What about short sales? Are they a better deal?
This is a very common question. First, to better answer it, let us separate distressed sales into three categories:
- Short Sale: This is where the homeowner owes more than the property is currently worth. They are selling it, almost always with the assistance of a Realtor, and have submitted paperwork to their lender(s) to see if they will absorb the amount of loss when the property is sold.
- Foreclosure (Auction Sale): Here the bank is forcing the sale of the home and it is being auctioned off, usually at the County Courthouse. This is an "all cash at end of business day" transaction, so you must have the cash available to complete the purchase.
- REO: This is where the bank has already taken the property back in foreclosure, and now they are selling it on the open market with everyone else.
So which one is the better deal? If you have the cash, you can pick up properties cheapest at the auctions however you must be very cautions.. typically you are not allowed to view the interior of these homes and it is your responsibility to research any liens or encumbrances that you will become responsible for should you win the auction.
Short sales tend to be the second least expensive. The trade-off is time - generally if you make an offer on a short sale and now that transaction has to be approved by the current bank that the seller has - it can take several months to get an answer back. We have seen short sales extending up to almost a year in some cases.
REOs are just like a traditional sales except a bank owns the property. The good new is you have a motivated seller that does not want the house, and generally you are dealing with very little emotion (as opposed to a seller who spent the last 30 years in the house and now is having anxiety about leaving). The bad new is, depending on your State, disclosure laws are generally more relaxed for banks that were forced to take a property back. They may not have to disclose to you any defects of the house, whereas a seller who lives there would.
Which one is the right choice? That's up to you, and your comfort level of risk. We believe it's more important to buy the right house that will make your family happy, not necessarily the cheapest one on the block.
5. I lost my home to foreclosure or short sale, can I ever buy a home again?
Of course, and it's not the end of the world. As a general rule, for government sponsored loans (lowest down payment) you would have to wait 3 years from the date of the foreclosure sale, 2 years from the short sale, and 2 years from bankruptcy discharge should you have gone that route. Should more than one of these have occurred, use the longer wait time so if you filed for bankruptcy, and there was a property included that went to foreclosure, then you would have to wait until either 2 years after the bankruptcy discharge or three years after the foreclosure sale - whichever is later.
Now, does this mean for the next two years you just sit back, eat bon-bon's and watch football on your new LCD TV? No. Make sure you check your credit completely six months after either the bankruptcy or foreclosure sale. We have seen where lenders are still reporting late payments on loans that were wiped out. You want to make sure your credit report is accurate early on to help get yourself ready for when you are ready to buy a house again.
6. I have limited income - can I still buy a house?
Yes you can. While home loans today require that you show, and that underwriters use your income for qualifying. For this reason, it is more important than ever to have a pre-purchase interview with a Buy a House counselor. We will go over your current financial position and help you strengthen the weakened areas so you can buy a house.
Remember we are on your side and will work with you to help you achieve your goals. Meeting early is one of the best steps you can take, and my getting the right advice early, you can be in your new home sometimes years quicker.
7. I am still trying to save some money - what should I do?
The most important step you can take is to meet with a Buy a House counselor. Even if you are not planning on buying for another year, we will meet with your for a pre-purchase interview and make sure all aspects of your financial picture are ready. If you want to save up more money, great! If you need assistance in getting your credit score raised, we can help!
Buying a house does not have to be a stressful situation. We make it easy and by meeting early, you will be much better prepared when it's time to apply for a get your home loan.
8. I am working with a real estate agent - what will you do for me?
We are not a real estate brokerage, and therefor work with many of the local agents in your community. We help you get yourself prepared so when it comes time to apply for and obtain a mortgage home loan, you will get approved. For this reason, Realtors love working with us as we help get their buyers in a position ready to buy faster than if they tried to do it themselves.
Once you are ready, if you know of a great Realtor that we should be working with, let your counselor know. We are always ready to expand our Realtor network with high quality, ethical Realtors.
9. What if I currently own my home but am having trouble making the payments?
First, we are very sorry to hear that you are having financial difficulties. Contacting us, even though we help people get into homes, can help you make some very costly mistakes. You may have to make a decision about whether to sell your home as a short sale, or maybe let it go altogether. It's tough to decide what is the right decision, and there seems to be experts everywhere.
First and foremost, you need to take steps necessary to minimize the impact losing the home will have on your family. We are referring to financial impact, from having a huge tax bill to getting a subpoena from your previous lender as they decide to sue you for the money that was lost. We highly recommend that you consult with a local attorney and have your particular situation reviewed. You may spend a few hundred dollars to get the right legal advice, but it could very easily save you several hundreds of thousands of dollars later.
10. What if I don't qualify now?
That's what we're here for and what we specialize in. If you are not in a position to qualify for a mortgage home loan today, we will work with you and get you ready as soon as possible. We will give you "home work" so that you can build your financial picture the right way, and be ready to buy a house in the shortest amount of time.
We never just say "No", we are happy to work with anyone who wants to get into a position to buy a house. We will stay with you, even if it takes years. That is our promise.
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