Buyer's Guide

Come Prepared

If you’re like a majority of consumers, purchasing a home represents your single, most significant investment – (and debt)! As such, the home buying process can be one of the more stressful experiences you will ever face. Given that buying a home is such a major step, it’s even more crucial for you to educate and prepare yourself as much as possible in advance. Because purchasing and financing a home go hand in hand, it also requires you to examine your current financial situation and determining how much you can afford. Once you have done the proper research and you have the right experts on your side, you will be in a better position to take the first step.

Buyers's Guide

First Step

The initial step towards home ownership is shopping for and getting a mortgage. First and foremost, you must determine how your mortgage payment will fit your current budget and, to some extent, your future obligations 15 to 30 years down the road. If you discover too late that you can't afford your mortgage, you'll not only face the possibility of losing the roof over your head, but you could also damage your ability to purchase a home later.

Most prospective homebuyers don't see a lender before they start house hunting and locating a realtor, but they should. This not only gives you an idea of what loans would be available to you, but it also makes you more attractive to both sellers and real estate agents when you have been preapproved for a home loan.

Second Step

You must examine your finances. If you can afford to buy a home, you must then determine how much mortgage you can afford. Lenders are apt to put your loan application in the best light and qualify you for as much as they are willing to lend, which can be more than you can afford.

It's up to you to take stock of your income and expenses, both current and projected to determine what you can comfortably manage each month. Along with your mortgage payment, don't forget related insurance, taxes, homeowner association dues and any other costs rolled into the mortgage payment.

Third Step

When you are ready to shop for a loan you have two basic types of mortgage stores to shop direct lenders and mortgage brokers (ask "Your Educated Realtors" for recommendation). Direct lenders have money to lend. They make the final decision on your application. Brokers are intermediaries who, like you, have many lenders from which to choose.

Lenders have a limited number of in-house loans available. Brokers can shop many lenders. If you have special financing needs and can't find a lender to suit them, an experienced broker will help you get a loan. Mortgage brokers, however, are paid with a slice of the amount you borrow, some more than others some less. Along with shopping the source, you'll also have to shop loan costs, including the interest rate, broker fees, points (each point is one percent of the amount you borrow), prepayment penalties, the loan term, application fees, credit report fee, appraisal and a host of others.

Fourth Step

The application process is the easy part. The loan officer will help you with this process. The application will ask for information about your job tenure, employment stability, income, your assets (property, cars, bank accounts and investments) and your liabilities (auto loans, installment loans, mortgages, credit-card debt, household expenses and others).

The lender will run a credit check on you to take a look at your credit status, but you'll have to supply additional documentation including paycheck stubs, bank account statements, tax returns, investment earnings reports, rental agreements, divorce decrees, proof of insurance, and other documentation.