REwatch: Smart buyers understand the home buying and financing process

2014-03-30T09:15:00Z REwatch: Smart buyers understand the home buying and financing processMichelle Krueger Times Columnist nwitimes.com
March 30, 2014 9:15 am  • 

When it comes to major purchases like cars, TVs, couches and even diamond engagement rings there is no “one size fits all” option. Buyers need to compare features, benefits and pricing before making the best decision for their unique circumstances.

Taking the leap into buying a first or next home is an even bigger deal. It’s likely going to be the largest purchase you’ll ever make, so approach the process like any other large purchase. Do your homework. Talk to family and friends about their experience and find an expert to help you navigate the real estate process.

After all, you seek advice and alternate opinions from doctors, lawyers, accountants and even sales clerks when necessary. So it would only make sense to have a professional in your corner guiding you every step of the way through the home buying process – unless of course it’s something you do everyday as well.

Most likely, you’ll start your search online. It may be time consuming, but it’s important to look at comparable homes in your target area. You definitely want to look at a variety of options to get a feel for pricing in the area.

As you look for the properties you are most interested in, you can also shop and compare REALTORS® in that area online with no obligation. This is a great time to ask family and friends about their home buying experience and if they would or would not recommend their Realtor and why or why not.

Then, take your search to the next level and contact a couple of Realtors who stand out by referral and as being active in the area where you are looking. Remember a professional Realtor always puts your interests first with the experience and know-how to get you the home that best suits your needs for the best possible deal.

Never be afraid to ask questions about the services a Realtor provides. A good agent will understand and address all your concerns.

For example, along with being a local expert, your Realtor should be knowledgeable about the financing process and mortgage loan options available to you. You should ask him or her about tax and insurance policies that may impact your purchase. Also ask about the agent's experience in making tough negotiations. Is your agent going to work hard to get you the best price on a home?

You also want to understand that before taking you on the road to look at potential homes, your Realtor will walk you through the steps necessary to get pre-approved for a mortgage.

Just because you don't apply for a thirty-year mortgage every day does not mean you have to take the first offer that comes along. You need to work with someone who is willing to take the time and help you thoroughly understand what you're getting into. For example, do you understand how and why your financial situation – including your credit score – affects your ability to get approved as well as your interest rate?

In addition to credit scores, mortgage lenders look at other factors, like debt-to-income ratios and employment history. In some cases, even a perfect credit score can’t get approved - if the appraisal comes in too low or if income or assets aren’t well documented.

Beyond that, while most people understand that better credit scores can help them achieve their financial goals, including homeownership, they may not realize how specific elements like payment history, debt usage, credit age, account mix and inquiries come into play.

Most credit scores operate within the range of 301 to 850. Within that range, there are different categories, from bad to excellent:

• Excellent Credit: 750+

• Good Credit: 700-749

• Fair Credit: 650-699

• Poor Credit: 600-649

• Bad Credit: below 599

Once again, mortgage lenders all have their own definitions of good credit scores. One lender may approve borrowers with credit scores of 680 or higher. Another might be more selective and only approve those with scores of 750 or higher. Or both lenders might offer credit to anyone with a score of at least 650, but charge consumers with scores below 700 a higher interest rate.

That’s why it’s so important to surround yourself with a team of professionals that you feel confident will help you make the right decisions every step of the way during the home buying process. After all, there are always other buyers out there competing for homes – so when you find the right one, you want to be prepared to move quickly.

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