The steps in the home-buying process closely resemble the planned buying steps outlined in Chapter 8. It may take several weeks or months to find a home that represents a good value and another four to five months to actually move into the home. Special attention will need to be paid to the seven steps outlined in Figure 9.1.
Get Your Finances in Order
You need to be financially ready to buy a home. Three tasks ease the process considerably: doing a credit checkup, accurately estimating all monthly housing costs, and fitting projected housing costs into your budget
Do a Credit Checkup Your credit history can make or break your chances of buying the home of your dreams. Obtain copies of your credit report and your credit scores from all three major credit reporting agencies (lenders use all three) about six months in advance of buying housing; you can then clear up any errors before the loan application process begins.
Get Your Finances in Order
You need to be financially ready to buy a home. Three tasks ease the process considerably: doing a credit checkup, accurately estimating all monthly housing costs, and fitting projected housing costs into your budget
Do a Credit Checkup Your credit history can make or break your chances of buying the home of your dreams. Obtain copies of your credit report and your credit scores from all three major credit reporting agencies (lenders use all three) about six months in advance of buying housing; you can then clear up any errors before the loan application process begins.
Estimate Your Monthly Housing Costs Using Internet Resources
It is vital to have an accurate estimate of what you will have to pay on a monthly basis for your new home. It is not enough to just estimate the amount of the payment for principal and interest on your mortgage loan. Other costs can add up, too. Fortunately, resources available on the Internet make that task much easier.
- Start by choosing the type of home you would like to own and the neighborhood in which you would like to live.
- Go to the www.realtor.com website to search for housing that matches your interests. You will be able to estimate the selling price of similar housing and, by subtracting your available down payment amount, estimate the amount you will need to borrow.
- Go to the www.bankrate.com website to estimate the current interest rates on mortgage loans in your market.
- Use the calculator at www.bankrate.com to estimate the monthly payment for a loan of the amount you need at the prevailing interest rates.
- Add an additional 30 to 40 percent (it was 36 percent in the Table 9.1 example) to the monthly payment on the loan for such things as homeowner’s insurance, property taxes, maintenance, and upkeep.
Fit the Housing Costs into Your Budget Once you have an estimate of the monthly costs associated with buying a home, you will need to see how these costs fit into your budget. As discussed previously, you should include all likely components of the monthly payment into your budget: the principal and interest, property taxes, homeowner’s insurance, mortgage insurance, and perhaps a home warranty fee. You should also consider any additional costs you might pay for utilities. Heating, air conditioning, electric, and water are all areas for which homeowners generally pay more than renters, and including a 50 percent increase for these into your budget is appropriate.
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