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FIVE - Research the Financial Aspects of Home Buying
DO...
• Assess your financial resources and debt load before you begin. Know how much you can afford and how much debt you're willing to carry. Understand debt-income ratios.
• Determine how much you can afford and how much you want to pay. Use mortgage calculators, and get prequalified with a lender.
• Know how you will fund your down payment. How much do you have? How much will be required? Investigate low down-payment purchase options. Note that if you put down less than 20 percent of the purchase price, you may be required to carry Private Mortgage Insurance (PMI), which will add to your monthly housing payment.
• Check your credit well before making an offer and applying for a mortgage. The three major national credit reporting companies are:
- Trans-Union (800-888-4213/800-916-8800)
- Equifax (800-685-1111)
- Experian (888-EXPERIAN/888-397-3742)
Credit reports do cost a small fee, but you may be eligible for a free report based on the state you live in or as a result of other services to which you subscribe. Scour reports for inaccuracies or outdated information, and report any issues to the credit bureau.
• Learn all you can about mortgages. Complement your intelligence-gathering with helpful overviews, such as the Federal Reserve Board's free guide, Home Mortgages: Where to Shop and What to Look For. Know about mortgage types, down payment requirements, other costs, relevance to your needs, and how long you expect to live in your home.
DON'T...
• Avoid serious discussion about family finances or concerns about debt management. Discuss them now to avoid regrets later.
• Think that your lender will overlook or ignore past or present credit problems. Correct problems immediately and be prepared to explain legitimate issues and to detail steps you've taken to correct errors.
• Wait until an offer is accepted to think about financing needs and qualifying for a mortgage. The mortgage process can be one of the most time consuming, and being prepared is key.
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