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Chet & Steve
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Re/Max Alliance |
| 5440 Ward Road, Suite 110 |
| Arvada, Colorado |
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| Direct: 303-525-7287 |
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Office:
303-420-5352 |
Toll Free:
800-541-6376 |
Fax:
303-474-3955 |
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INTRODUCTION
- Buying a home is one of the biggest investments you may ever make financially. While it is a major commitment and responsibility, it can also be a thrilling experience and a very exciting time in your
life. With that said, we would like to congratulate you on your decision to buy a new home! It is
always a privilege to hand the homebuyers the keys to their new home and to be there for that first
moment of celebrating ownership!
Buying a new home can sometimes seem like a daunting process, but we want to assure you that
our goal is to make that process as easy, carefree, and rewarding as possible.
This home buying guide was put together with that focus in mind. It will inform you on what to
expect throughout the home buying process, and it will also tell you what others involved in the
transaction expect from you as the buyer. You’ll find many helpful suggestions to help you make
informed decisions, as an educated buyer, at each step of the purchasing process.
You may find this booklet most helpful if you view it as a “tool” you can use every step of the
way. Carry it with you so that it is quickly at your fingertips should you need to refer to something.
We also encourage our clients to use the blank pages at the back of this booklet—or to maintain a
separate notebook—for jotting down specific questions and notations as they come up. And, carry
your notebook to each home that you view to make notes that you can refer to again and again.
Please review all of the information presented here carefully, and don’t be afraid to ask questions
about anything you don’t understand. Although the information is covered as thoroughly as
possible, every transaction is unique, and you may find that you have concerns or questions beyond
the information presented in this booklet. That’s why we’re here—to assist you at each state of the
transaction, to answer your questions, and to help you find the home you desire!
As you embark on your mission of finding the “perfect home,” remember that we are with you
every step of the way—we’re on your team! |
FINANCING
- Your initial impression may be that we have incorrectly placed the financing segment first.
Actually, we’ve chosen to discuss finances at the beginning for good reason: The buying experience usually goes smoother if financing has already been secured before you begin searching
for your home.
Most homebuyers find that they need to finance at least part of their home purchase. So, in many respects, owning your dream home hinges on your ability to get the financing you need, in the price
range you can afford.
The very first step is ensuring that you are in an optimum buying position. This entails a careful review of your financial situation. Think of it as a means of pre-qualifying yourself.
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Your Credit Report
- A very basic—and yet extremely important—factor in your ability to get a mortgage is your credit
rating. It is not a secret that the best interest rates, as well as the most flexible loan terms, are available only to those with the strongest credit scores. Your credit history is one of the principal measures used by a lender to determine your interest rate. Not only will your monthly mortgage payment depend on your interest rate, but the amount you qualify to borrow will be affected by it as well. A higher interest rate translates into a higher payment and may reduce the loan amount for which you can qualify.
You should be aware of what information the credit reporting agencies have regarding your
financial situation by obtaining and reviewing copies of your credit report from the three main
credit reporting agencies. (Even if you are not planning to purchase a home, you may want to
consider obtaining and reviewing your credit reports on an annual basis to make sure the
information reported is accurate, and to catch any discrepancies that could damage your credit.) By making this task one of the initial steps in your house-hunting venture, you may save yourself from unnecessary delays later in the purchasing process. |
Credit Reporting Agencies
- There are three major credit-reporting agencies: Equifax, Experian (formerly TRW), and Trans Union.
Rather than contacting only one of them, we strongly suggest that you request a credit report from all three. Since not all creditors report to all three agencies, it’s not uncommon to find different information reported on each one. However, your goal in ordering all three credit reports is to make sure that all of the information stated on each report is accurate and correct.
You can request your credit report from these companies for a nominal fee. An annual report is
free upon request for residents of Colorado, Georgia, Massachusetts, Maryland, New Jersey, and
Vermont. Additionally, you may obtain a free personal credit report if you have been denied credit within the past 60 days.
Here is how to contact the credit reporting agencies:
Equifax
Equifax Information Service Center
P.O. Box 740241
Atlanta, GA 30374-0241
1-800-997-2493.
You can also order your credit report from a secure section of the Equifax website at
http://www.equifax.com.
Experian
Experian National Consumer Assistance Center
P.O. Box 2104, Allen, TX 75013-2104
1-888-397-3742
You can print a credit report order form at http://www.experian.com.
Trans Union
Trans Union Corporation, Consumer Disclosure Center
P.O. Box 390
Springfield, PA 19064-0390
1-800-888-4213
You can order a credit report online from Trans Union’s website at
http://www.transunion.com. |
HOW MUCH HOME CAN YOU BUY?
- Although it is early on in your plans to purchase, it is likely that you have wondered how much home you will be able to buy. The best way to determine your purchasing power is to speak with a lender. However, there are several rules of thumb that will give you an approximate idea of what you will be able to spend.
The first rule states that you can afford a home with a price tag that is 2.5 times your annual
salary. For example, if your annual salary is $50,000, applying this formula would mean that you can probably shop for a house with a price up to $125,000. The second rule says that you should be able to use 30% of your gross monthly income (before taxes and deductions) for a house payment. Assuming, for example, that your gross monthly income is $4,000 and using this formula as a guide, you may be able to comfortably afford a monthly payment of $1,200. |
PRE-APPROVAL
- Once you narrow down which type of lender can best meet your needs, the next step is to get preapproved for a loan. Pre-approval is not the same as pre-qualification. What’s the difference
between pre-qualification and pre-approval? In the world of real estate, the erms “prequalification” and “pre-approval” are often used interchangeably. But they have different meanings.
Pre-qualification is an estimate of how much you can afford in a mortgage payment. It is based
upon the information provided by the borrower, which will later be subject to the approval process and additional information, including a credit report, appraisal, and income verification. The information provided by the borrower is not routinely verified as part of the pre-qualification process.
Pre-approval, on the other hand, is a firmer commitment on behalf of the mortgage company.
Obtaining pre-approval is a more formal process that includes a credit check and employment
verification. During a pre-approval, the mortgage company does all the work of a full approval except for the appraisal and title search. The lender obtains a credit report to verify monthly payments on installment loans and credit cards, and to check payment history on these loans.
If you’ve been pre-approved for a loan, you can shop for a house with more certainty and less
anxiety because you’ll be able to sail through the entire process without having to worry about
whether the mortgage will be approved. Additionally, the seller is likely to view you as a more capable buyer. This can give you an advantage as a buyer in the marketplace, especially when the seller is considering multiple offers.
However, neither a pre-approval nor a pre-qualification means you are guaranteed a mortgage.
Lenders still need to look at property appraisals, verify information, and, in many cases, re-check credit before agreeing to make a loan. Still, it’s worthwhile to obtain pre-approval at the beginning of the buying process to know how much home you can afford and to avoid the headaches and embarrassment of not qualifying for a home you have under contract. |
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There are two ways to live your life.
One is as though nothing is a miracle.
The other is as though everything is a miracle
Albert Einstein
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