Buyer Tips -

Steps to Getting Your Finances in Order

Develop a family budget: Instead of budgeting what you'd like to spend, use receipts to create a budget for what you spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as medical, dental, auto repairs, etc., as well as predictable costs such as rent.

Reduce your debt: Lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt – car loans, student loans, revolving balances on credit cards – down to between 8 percent and 10 percent of your total income.

Get a handle on expenses: You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. You'll probably see some great ways to save.

Increase your income: It may be necessary to take on a second job to get your income at a high-enough level to qualify for the home you want.

Save for a down payment: Although it's possible to get a mortgage with only 5 percent down –or even less in some cases – you can usually get a better rate and a lower overall cost if you put down more. Target for saving a 20 percent down-payment.

Create a house fund: Don't just plan on saving whatever is left toward a down-payment. Instead decide on a certain amount per month you want to save, then put it away as you pay your monthly bills.

Keep your job: While you don't need to be in the same job forever to qualify, having a job for less than two years may mean you may not be able to obtain a loan. Lenders normally want to see that the borrower has worked in the same line of work for 2 years. However, if for example, you are graduating from college with a degree and will start working at a new job in your profession, then this will be acceptable.

Establish a good credit history: Get a credit card and make payments by the due date. Do the same for all your other bills. Pay off the entire balance promptly. It is advisable to pay off your credit card balances monthly.

Have Cash in Reserves: Well before a buyer starts looking at homes, it is advisable to save as much as possible and have cash in reserves that extend well past closing costs. That way, a buyer’s wallet isn’t stretched so thin and they can still feel financially comfortable even once making one of the biggest investments of their lives.

Most Important:

Start saving now: for a down payment, closing costs, moving expenses, cash reserves and anything you will need when you move in.

Only buy what you can afford: Create a budget and know how much you can comfortably pay each month for your home. Every family should know their monthly income and where that money goes. If you increase the amount that you are spending for your home, what expenses can you cut down on? Be honest with yourself. Compare what you are paying for rent vs. what your mortgage payment will be. Most homebuyers struggle to pay more than 35 percent of their monthly income for housing costs.

Read the fine print: Read documents thoroughly and ask questions if you don’t understand something.

Be an informed buyer: Ask lots of questions and make sure you get a complete and clear answer to every question. The more you know the more you will save.

Shop for your mortgage loan: Compare loan details from several lenders. Get all the terms in writing.

Take your time – don't feel rushed: If someone rushes you – walk away! Realize that lenders, attorneys and real estate professionals only get paid when/if your loan closes.

Do Not sign anything you don't understand: Seek advice from a trained professional.

Know what you are buying: The purchase and sale agreement should allow you to have an independent Physical Home Inspection done and have repairs made before you complete the purchase. A home inspection will tell you the condition and identify necessary repairs such as: the roof, heating system, plumbing, wiring, foundation and lots more.

Don’t Skip the Home Inspection: The home inspection is an opportunity for you to learn about your home. It is Not a chance to renegotiate the contract or walk away if the seller doesn’t fix every little thing. It simply educates you about your home. If the home inspection does uncover significant, serious issues, your agent will inform the seller’s agent about the situation and determine the best path to move forward with the transaction. If the seller is unwilling or unable to remedy the issues and you are within your inspection contingency period, then you have the option to cancel the transaction.

Be Present at the Home Inspection: You and your agent should be present at the inspection, so you can learn things and get questions answered directly from the home inspector.