As we start fresh every year, I try to share my list of resolutions to get your finances in order and help you buy a house. The real estate market hasn’t had much good news for the past few years, and mortgage lenders have gotten even tighter with their lending regulations.
This isn’t a particularly happy state of real estate affairs. And yet, the only hope for a recovery is if qualified buyers come back to the real estate market.
So here are a few New Year’s resolutions you should make if you hope to buy a home in 2012:
1. Pull a copy of your credit report and credit score. Mortgage lenders have become extremely conservative in deciding which mortgages will get funded. Lending requirements are getting tighter and tighter. Lenders will pull credit scores from each of the three credit reporting bureaus—Equifax, Experian, and TransUnion—and then use the middle score to determine your loan’s interest rate and terms. You need to know that information ahead of time.
Go to AnnualCreditReport.com to receive a free copy of your credit report, and then pay for your credit score (about $9). Remember that once a year you can get a free copy of your credit report from each of the three credit reporting agencies.
If you’ve already used up your freebies, you can also see all three credit reporting bureau credit reports with your Equifax Credit Report. Even if you don’t plan on buying a home or refinancing a home loan in the near future, you might want to keep tabs on any issues that may be affecting your credit score.
2. Practice good credit behavior. Lenders regard those with a credit score above 780 as their best borrowers. Unless your credit score is above that level, you should work on eliminating any errors and practicing good credit behavior so that your score rises.
The best thing you can do to improve your creditworthiness? Pay your bills on time and in full each month. The next best thing you can do is to maintain a few open and active lines of credit.
Take a look at the credit tab for more tips on how to improve your creditworthiness and be the most attractive borrower to lenders.
3. Shop around for the best mortgage loan. Even though the federal government is backing more than 90 percent of all the loans through Fannie Mae, Freddie Mac, FHA, VA, and USDA, it pays to shop around. Make sure you talk to at least four or five lenders before you sign your application, including a “big box” lender, a small local lender, a credit union, a mortgage broker, and an online lender. Use the information from each lender to negotiate one against the other and get a great deal for yourself. Yes, you’re allowed to negotiate with lenders and to ask them to give you a better deal.
4. Create a great home-buying team. You’ll want a team of real estate professionals who can help you find the right property, at the right price, on the right terms. To start, homebuyers will want their team to include a great real estate agent, a mortgage broker, a real estate attorney, a tax preparer, and a real estate inspector. Having the right team in place will go a long way toward making your dream of homeownership come true.
I wish you the best of luck with your financial goals in 2012.
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and at the Home Equity blog for CBS MoneyWatch.
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