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Checklist for first-time homebuyers

[Nov 3, 2010.]


You've tired of being a renter, you've got a stable job, and you're ready to begin house hunting. Before you start hitting the open-house circuit, make sure you have a plan to achieve your goal of homeownership. Use the following first-time homebuyers checklist to guide you through the mortgage application and the home buying process.

  • Check your credit. If you have bad credit, you won't qualify for a mortgage. Take the time to pay off credit cards, auto loans, and other debt to improve your chance of getting approved for a mortgage loan. Couples who plan to buy a home together need to get a copy of both credit reports and repair bad credit.

  • Get your down payment together. The more money you have to put down the less you have to finance. Having at least a 20 percent down payment can keep you from having to pay private mortgage insurance. PMI can be paid at closing or rolled into your mortgage payment. Use a mortgage calculator to see how the amount of the down payment affects monthly payments on a mortgage.

  • Shop around. Compare loan deals from several mortgage lenders. Get detailed information about various mortgage programs you might qualify for. Ask about best mortgage rates, mortgage points and an estimate of closing costs. A point equals 1 percent of the amount of the mortgage loan. Paying points lowers the interest rate on a mortgage but increases your up-front costs.

  • Get pre-approved for a mortgage. Pre-approval shows sellers that you are a serious buyer because it proves that a mortgage lender is willing to finance your purchase. A pre-approval letter gives the amount that you are eligible to borrow so you know exactly how much house to shop for.

  • Don't buy more house than you need. Buy what you can afford so you won't be stretched each month when making monthly payments on a mortgage. In addition to mortgage payments, you'll have to pay for property taxes, home insurance, utilities, and other inevitable housing expenses such as repairs.

  • Read and understand what you are signing. After applying for a mortgage, review the Good Faith Estimate (GFE) carefully. This document gives a good idea of all the fees and closing costs involved with borrowing money.

If you are a first-time homebuyer (or if you or your spouse haven't owned a home for at least three years), you may be eligible for assistance. Check with the local housing agency and other community organizations to see what help is available. Assistance could include low-interest mortgage loans or counseling for debt elimination and credit repair.


About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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