Preparing to buy: Do’s and don’ts for your home purchaseby Tim Manni
Do: Check Your Credit
Many credit reports contain erroneous data. If one exists, it can lower your credit score and cost you thousands of dollars, or even keep you from getting a loan. Check out Fannie Mae’s Loan Level Pricing Adjustment matrix. A mortgage with a 679 FICO score can cost a full point more than the same loan with a 680 score. That’s an extra $3,000 for a $300,000 loan. You can get your credit report for free from www.annualcreditreport.com, and pay the nominal fee to get your credit score as well. Your score will give you a better idea of how mortgage lenders will evaluate you, and you may be able to correct errors and raise your score a few points before applying for your home loan.
Do: Use a Mortgage Calculator
Your lender can tell you how much home you qualify to buy, but only you know what payment you can comfortably afford. It’s rarely a good idea to leverage your income to the maximum since it leaves no room for error or any change in plans or income stream. A comfortable payment, rather than a maximum one, might allow you to cut your income, go back to school, start a family, retire early or keep taking expensive vacations. A mortgage calculator can show you how a comfortable payment translates to a home purchase price. Then, you can refine your search to affordable properties that won’t break your budget.
Don’t: Give Everyone Your Social Security Number
Once you have your credit scores, give that information to lenders when shopping for a loan. There is no reason to provide personal data like Social Security numbers until you decide on a lender. There’s no reason to compromise your identity, and having your credit report pulled indiscriminately by loads of lenders over several weeks can drop your scores (and cost you money!).
Don’t: Cave In to Pressure
Finally, don’t sign anything you don’t understand or feel uncomfortable with. Don’t let a real estate agent, lender or anyone else who stands to make money from your purchase push you into anything. It’s you who will be living in and paying for that home for a long time to come.
Click here for more homebuying do’s and don’ts. Got a homebuying question? Leave us a comment below and we’ll be sure to answer you.