Before
Buying A Home....
Unless you are paying cash, you need to get pre-approved
for a loan before you start cruising the MLS
Financial documents, like bank statements and
tax returns, are needed to get a mortgage.
You know how to look for a house. But the money part is trickier.
You need to start working on the financial details of buying a home three to four months before you want to move into your new digs.
Here's a step-by-step breakdown:
1. Gather the financial documents you'll need to get a mortgage:
· pay stubs
· statements from banks, brokerages
and retirement accounts
· income tax returns
· records of debts such as auto loans, mortgages,
student loans and credit cards
2. Find out your credit score.
Your credit score is a distillation of your bill-paying history expressed as a
three-digit number between about 300 and 850, the higher the better. A score
above 720 is most desirable, the equivalent of a getting an A. These credit
scores are calculated using a secret mathematical formula devised by the data
management company Fair, Isaac & Co.- hence the name "FICO."
3. Fix any errors on your credit report.
Errors appear regularly on credit reports, and they can lower your credit score
and keep you from getting loans with lower interest rates. Clerical or computer
errors cause most mistakes on credit reports. You can correct them by sending a
letter to the credit bureau describing the mistake and requesting an
investigation. Getting that incorrect report off your credit report will take
at least a month.
4. A broker or lender will look at your pile of paper and estimate
how much you can afford to borrow.
Our advice: Don't borrow the maximum amount for which you are approved.
5. Get pre-approved for a mortgage so that when you make an offer
for a house, it's taken seriously.
When you're pre-approved, a lender has agreed to lend you a certain amount of
money for your home purchase at specified terms and conditions. Pre-approval
gives you leverage in the deal-making process, because it establishes your
buying power. The letter of preapproval you get from your lender makes the bid
you put on a property as reliable as a cash offer.
Now that you're pre-approved for a mortgage, you're ready to shop
till you drop.