Buying Real Estate: A Beginner's Guide

You have decided it is time to get into a home of your own. There are many reasons that we come to this decision. Perhaps you are expecting a new addition to your family and would like space to set up a nursery and have the privacy and enjoyment a home of your own can afford you. You may want to begin gardening and enjoy entertaining friends in your yard. Pets are another reason to have your own home. Not only is it room for your pet to run and exercise, many apartments dwellings do not allow any pets or just one small dog or cat.

The prospect of buying a new home is exciting and if you follow some basic guidelines you will make it go much smoother for yourself and the people you will be working with to close your deal.

Some key people you will be working closely with are the real estate agent and the bank you will obtain your mortgage from. It is important that you feel comfortable with the real estate agent. The agent should take a serious look at the list you will provide outlining what you are looking for in a home. The bank you will be associated with in obtaining your loan should provide you with clear expectations on documentation and types of loans that are available to you. If either the real estate agent or bank representative are not able to furnish you with complete information, move on until you find an agent and bank that can answer your questions all through the house hunting and loan process. Communication is key to surviving the real estate buying process and doing it with success.

Understand the different types of mortgages that are available. If you do not there will be some unwanted surprises down the road. Two types that I will mention are Fixed and Adjustable rate. In the "Fixed Rate" you will lock in at a percentage rate for interest and a set monthly payment on your mortgage for the life of the loan. These will never change. Alternatively if you select the "Adjustable Rate" your interest rate can change over time. This will affect what you are paying per month on your mortgage. If the rate goes up, your monthly payment goes up. It is possible for the rates to go down, therefore, lowering your monthly payment. This is a risk and you might potentially be paying more on your mortgage and this can cause havoc with your family budget.

There are many creative mortgage financing products on the market now. It is best to talk with your mortgage professional and understand how these can affect your bottom line. Know what you are able to bear related to your income and budget.

Your bank will be able to prequalify you before you go out to look at properties. This is of great benefit to you in that it will force you to stay within your budget and will not waste your time or the real estate agents by looking at properties that do not fall within your prequalified amount. Prequalified amounts are based on the credit history, debt, savings or other financial assets and employment information that you provide to your mortgage lender. You may not necessarily want to go for the highest qualified amount. Bear in mind that it is always wiser to leave yourself some breathing room here. Consider what you will have to put down on the mortgage, closing costs, and other items involved in buying a home such as moving costs, repairs if the home needs any. Don't be "house poor" by going for the top limit of what the bank will prequalify you for.

Get a copy of your credit history. This should be in good shape when you go to a bank for a mortgage. Look the report over and if there are any items that you need to clear up, now is the time to do that. You can obtain a FREE copy of your credit history from each of the top three credit reporting agencies once a year.

Experian: (888) 397-3742

Trans Union: (800) 916-8800

Equifax: (800) 685-1111

If you see any discrepancies on your report you will need to write to the credit reporting agency, providing documentation to back up your request to make the correction. Also ask that the agency notify the other major agencies. Request that they send you the corrected report. This is usually done as a result of the request to make a correction, but it does not hurt to emphasize this.

Your credit report affects your credit score. The score is what your mortgage lender will use to base your qualification for a mortgage loan on. You may also have heard this referred to as your FICO score and that is because these three digit scores were created by the firm Fair Isaac Corp. This score is based on the information obtained from the major credit reporting agencies reports on you. The higher your score the better your opportunity to obtain a lower interest rate on your loan. Once you have a copy of your credit report each of the bureaus is required to provide you with your credit score at no charge. If they do not offer this option at the time you call for your credit report, call them back and reference the file number on your credit report and request your credit score report.

Your lender will need to see various documentation when you apply for a mortgage loan with them. These will include bank statement, pay statements, tax records, employment history, any secondary income sources, investments and other accounts.

Be prepared with information such as your social security number, email address, current expenses such as credit card debt, loan payments, child support, etc. Usually a previous address is required if you have been at your current address less than 2 years. Most important, what amount do you have as a down payment on the property?

The potential lender will of course review your credit reports. This is why it is vitally important to have gone over these and made the necessary corrections before starting the loan process.

There is information available on the Internet that is very useful in educating yourself on the home buying process. I have included a few of those sources in this article for your reference.

Homebuyer's Information Center
http://www.ourfamilyplace.com/homebuyer/

The Homebuyer's Information center has valuable information and check-lists for the prospective home buyer. You can find information on

* Real Estate Agents
* Mortgages and Prequalification
* Hints on Finding a House
* Offers and Contracts
* Inspections

are just a few of the many topics they cover at their comprehensive site.

ABC's of Real Estate
http://content.realestateabc.com/homebuying/

The ABC's of Real Estate contains links to articles that will help you educate yourself on the various aspects of purchasing a home. The topics include

* Things Not To Do Before Buying a Home
* Reasons to Delay Buying A Home
* Why Search for A Realtor
* How FHA and VA Financing Affect Your Offer
* Offering to Purchase Real Estate - The Basics

Read through the information and take notes as you go along. You will have requirements of your own and more questions that you will want answered.

U.S. Department of Housing and Urban Development, HUD web site
http://www.hud.gov/buying/index.cfm

This site is a must for anyone contemplating a home purchase. The government site has links on topics such as avoiding predatory lenders, loan fraud, and how HUD helps everyone live the "American Dream" of home ownership.

You can find a housing counselor near you to help with advice on buying a home, credit issues and more.

The site impresses that you should know your rights and you can read information on fair housing, homebuyer's rights, your rights and the responsibilities of the mortgage servicer.

The issue of saving yourself time is covered here. This is a point I referred to earlier in this article about getting prequalified. The HUD site makes tools available to you on the web site so that you can calculate how much home you can afford. Review the various options in home buying programs such as FHA, HUD approved condos, HUD approved lenders and other programs that are available.

Realtor.com
http://www.hud.gov/buying/index.cfm

Realtor.com will allow you to search for homes in your locations of preference. You can enter city, state, zip code information. Additional screens will allow you to select particular specifications for your house hunt like single-family, 2 story, 3 bedrooms, 2 baths, garage, pool, fireplace, and so on if you choose.

The more you learn about the home buying process the better prepared you will be to actually select a real estate agent, go out and look at homes, and make an offer. Be prepared with your list of requirements that you want in a home, research neighborhoods that you are interested in, and ask questions.