Buying a home might seem like a giant leap; but getting from where you are now to where you want to be doesn’t have to come all at once. Rather than focus on the seeming enormity of the task, break it down into smaller, more manageable steps. Break it down into baby steps.
Baby-stepping your way out of the ranks of the apartment dweller and into home ownership can be accomplished by taking these simply, easy-to-follow baby steps:
Decide whether you should continue to rent or buy. Just because something is desirable doesn’t mean it’s good for you. Many renters, for example, are ready for the financial commitment of a long-term mortgage. Still, others have too much uncertainty in their lives when it comes to their jobs, income or family status. Knowing whether it makes more sense to rent or buy is the first step to becoming a homebuyer. There are times when it makes more sense to rent. But these must carefully weighed against the advantages of buying a home.
Get a copy of your credit report. If you aren’t sure how to interpret your credit report then consider speaking with a mortgage professional or housing counselor. The importance of credit cannot be over-stated when it comes to buying a home. In fact, having good credit is, in large part, what will determine how much home you can get. If you have credit problems then you’re going to need to work on cleaning up your credit. If there are only minor problems then you might qualify for an FHA-insured loan. If, on the other hand, you have major credit issues then chances are it’s going to take some time and discipline to get on the right track. Be careful when dealing with so-called “credit repair specialists”. While there are many legitimate firms out there, there is also no shortage of unscrupulous operations that prey upon individuals who possess only a layman’s understanding of credit laws.
Get pre-approved for a mortgage loan. In a way, this step is an extension of the previous step, since it is virtually impossible to get a loan without credit. Start by asking friends or family for referrals to trusted lenders. In the absence of referrals a little good, old-fashioned shopping and due diligence should help you find a lender you can work with. Lenders will start by collecting an application, including information on your income, assets, job history and credit profile. Once approved, you’ll have a good idea of how much house you can afford. The importance of this step is crucial. Most real estate brokers and real estate agents won’t be especially eager to spend time and resources helping you find a home until you can demonstrate that you are an able buyer—i.e., able to afford a home. Most lenders will be more than happy to provide you with a pre-approval letter.
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