Prepare Yourself To Buy A Home

Are you one of those sitting on the sidelines waiting for the right time to buy a house? Are you waiting for the best possible time, when home prices are as low as they're going to get and interest rates are still low? Don't just wait. Use this time to get ready so that you can move when the time is right. There are many possible hurdles and snags in the complicated, time consuming process of buying a home. Some of them could even stop you from getting the home you want. Now is the ideal time to find out what roadblocks you might face and get them out of your way.

By far the most challenging part of buying a home is qualifying for a loan. There are things you can do now to greatly increase your chances of getting a loan when you're ready.

Clean up your credit. Get a copy of your credit report from each of the three major credit reporting agencies. There are many services that will do this for you - for a fee. But you can get copies of your credit report for free by contact the credit reporting agencies directly. Get copies of credit reports for yourself and your spouse, or whoever you're planning to buy a house with.

Look for errors. If there is any incorrect information on a report, write a letter to the credit reporting agency explaining that the information is incorrect. There is an established protocol where they contact the creditor for a response. Get started now, because this process takes time. Don't just do it with one credit reporting agency. Go through this with each of the three. When you apply for a loan, the lender will request a credit report from at least one of three credit reporting agencies, but it's their choice which one(s).

Make sure you bring all accounts current and make all payments on time. If there are some damaging things on your credit report, they will count for less as they get older and your more recent history is positive. The best thing you can do it to make sure that your history is perfect going forward.

Don't open new accounts and try to decrease the balances of old accounts. Having too many loans can bring down your credit score, even if you always make your payments on time. If you're thinking of buying a car, wait until after you've bought your house. Car loans are much easier to get than home loans.

You'll need a solid employment history to qualify for a home loan. Lenders look for stable earnings, which usually means steady employment, in the same field for two years or more. You can switch employers without any trouble, as long as you're working in the same field. But if you plan to make a major career change, you might want to wait. The same goes for the way you earn money. If you are an employee earning a steady paycheck, but you want to go into business for yourself, you should think about holding off. Lenders want to see that you can keep up a steady income, and that means a two year history of doing so.

Start saving up to pay for closing costs and a down payment. You'll probably need to talk to a mortgage broker or do some research online to figure out how much money you need to save. You'll need to know how big a loan you can afford so that you'll know what price range you're looking at. Also, different types of loans require different down payment amounts. If you can get an FHA loan, you may be able to put as little as 3.5% down. You may be able to negotiate for the seller to pay some or all of your closing costs, especially if you buy a new home from the builder. Figure about 3% of the purchase price for closing costs.

Saving up money and improving your credit score can take time. Start now so that you'll be in the best possible position when you decide that it's time to take the plunge.

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