I thought my post today would be of interest to all that are in similar situations &/or know absolutely nothing about buying your first home. I write to you 1) acknowledging the process is 100% new to me and 2) is a little overwhelming. I’ll be sharing with you a few of the things that I have learned over the last week, that have made the “next step” a little easier to understand for me.
To get started: did you know there is a difference between pre-approved and pre-qualified? They do not mean the same thing! Pre-approved is the first thing that should happen before you begin looking for your new residence. You’ll visit a lender (of your choice) and the lender will need the following from you…so be prepared: 1.) 2 years of employment history including employer, job title & salary 2.) 2 years of address history 3.) most current bank /401k statements and other assets, 4.) most recent pay stubs and 5.) birth dates & SSN. It takes about 15 minutes and you can pretty much figure out the type of loan direction that is best for you as well as a number the lender is comfortable loaning to you (pre-approved). For example, you could be pre-approved for $350,000 from the lender, but you feel more comfortable looking at homes that are $250,00 and below. Go with whatever you feel most comfortable with because you will be the one paying it off every month and lets just be honest….who wants to be house poor? Your lender will email a letter confirming your pre-approval amount to your realtor, and your realtor in turn will get a feel for homes that are in your ideal price range.
Side note here: Lets say you find a house that you absolutely love, and it costs $290,000. Call your lender and they will forward a new pre-approval letter to your realtor…Problem solved. This is not a big deal and happens often (I’ve been told).
Second side note: You do not want to have a pre-approval letter stating the maximum amount you’ve been approved for. Example: your letter states your approved for a maximum of $350,000….you find a house for the asking price of $330,000 but offer a $315,000…..the seller of the home is going to come back and say: “they’ve been approved for up to $350,000, there is absolutely no way I’m coming down, because I know they can afford it”.
Another interesting fact I learned: when it comes to the lender locking in an interest rate…. a way to gain a higher “credit score” is to make sure and have your total debt under $504.00 or pay off all debt so its at a $0 balance, when she/he run all the numbers…it can sometimes boost your credit score which in turn will give you a better interest rate. TRUST me, every percent counts over 30 years time! This tip however, is hard or almost impossible to do…because most of us have more than$504.00 in debt! (pretty much everyone, lol!) But hey, its a great tip for the few out there that have this possibility. Once the lender has figured out your interest rate…it will be locked in for 90 days! Which is a good thing…unless you can’t find a house…and then you just go through the whole process again…..which is also a possibility-but don’t stress about it! There is a house out there for you…so DON’T settle.
As we have not made a offer on any house yet (we just got pre-approved, and I’m not rushing into anything), I do not have first hand experience with “pre-qualified” yet. However, my understanding is: you get pre-qualified, when you have made an offer, and all of the paperwork has to go through the underwriter, which takes about 5 days. Then if the underwriter says all the paperwork is good, you’ve been pre-qualified.
Things I’ve learned so far:
1.) Don’t judge a picture. Sometimes a house could have awful pictures taken of the inside/outside and probably by the owner who was being cheap not hiring a photographer. If it sort of looks like something you might like…check it out, don’t write it off.
2.) If it says “by a park” or “greenbelt”…It might not mean literally… The “wording” could be deceiving and it actually is several blocks from one…or, the greenbelt is actually a strip of grass with trees that will take ages to grow to maturity….so you’ll be seeing your neighbors for the next 30 years!
3.) Not everyone takes care of their house like you/have the same standards. Some people really still live in the 70’s! Or you might see someones dirty underwear in the middle of their bedroom!
4.) Do a google map-street view of a house, before you even waste your time checking it out. You will be able to tell if the house is on a corner, next to a gas station, possibly next to industrial power lines, or even a “condoms to go” store.
5.) Do a drive by AT NIGHT, to make sure your not moving into the hood. Night changes everything, and you might just find out that “great neighborhood” isn’t so magical when the street lights come on.
6.) Go online and check to see where the neighborhood/closest sexual offenders are living. Your probably not going to want to live right next to them if you have kids or will be having children. This is also a drawback when it comes time for resell. Your realtor will not do this for you…it is your responsibility, and the information is free and provided to the public.
7.) Lastly, it could possibly take up to 60 days for your house to close…so start looking early!