Knowledge is power! Before you get started, do some research and become an educated buyer. One way of meeting that goal is to enlist the services of a trustworthy, knowledgeable REALTOR®. Utilizing a professional allows you to continue to live your life and enjoy the journey as you embark on one of the most important and exciting decisions in your lifetime—becoming a homeowner.

BUYING VS. RENTING

As most are aware, home ownership offers tax benefits as well as freedom to make decisions about your home. Although renting gives the advantage of not having to worry about maintenance and other financial obligations associated with owning property, ownership provides a direct sense of security and accomplishment.

You can “run the numbers yourself”. For example, if you are paying $1000 per month for rent, and you have been renting for 24 months, that is $24,000 you have paid toward the owner’s mortgage. Understandably, you may have incurred some hardships along life’s journey which might not permit you to consider purchasing a home of your own at this time.

Take a look at your past and current financial obligations and payment/credit history. Ask yourself questions such as:

	1.	What is my credit rating and does it need improvement?
	2.	Have I made any late payments on installment loans (credit cards, vehicles, etc.), rent, or mortgage payments?
	3.	Has a hardship caused you file for bankruptcy? If so, has it been cleared? Do you have the documentation to prove it?
	4.	If my credit rating needs improving, how long will that take?
	5.	Do I need, or am I planning, to make any major purchases in the near future that might affect my credit score?

All lenders will conduct a credit history review. At that time, should the results be less than favorable, consider asking for assistance and guidance to improve your credit. Write letters of explanation for bad credit items that you know about before the credit history verification. Keep a file of all closed accounts. That will assist you resolving errors on your report. Most lenders know of programs that will help you clean up any issues and improve your credit score within a reasonable amount of time.

Your professional REALTOR® often can refer you to several lenders. There is nothing about which to be embarrassed—everyone has experienced difficulties throughout their life at one time or another.

If one says “no”, go see another lender. Remember—never give up!

WHAT IS THE BEST MORTGAGE FOR MY NEEDS?

As most people compare grocery store prices and inventory, it is the smart thing to do when considering a mortgage. Home loans are provided through many sources including mortgage brokers, credit unions, banks, and the secondary market. Every lender has fees and loan costs—be sure to shop and compare. Several of the fees are loan origination points, application and processing fees, and title search fees. These can truly add up!

Discuss the pros and cons of the different types of loans available: zero-down, 103%, no income verification, balloon loans, reverse mortgages (especially if you are elderly), adjustable rates, and fixed rates.

PRE-QUALIFIED VS. PRE-APPROVAL

Pre-qualification letters do not obligate a lender to you. Pre-qualification letters indicate a possible amount for a home purchase based on information the buyer prospect tells the loan officer. There is no in-depth evaluation of the credit history. To make a stronger offer, a pre-approval letter is preferred. The pre-approval letter is based on a review of your credit history, scores, and income:debt ratio. The acquisition of a pre-approval letter makes for a stronger offer.

INCOME TO DEBT RATIOS
Although the ratio varies between lenders, typical percentages to consider are:

	1.	Monthly mortgage cannot exceed 28-29% of your gross monthly income;
	2.	Total debt (car payments, credit card payments, etc. including your mortgage) cannot exceed 36-40% of gross monthly income;
	3.	Housing expenses (principal, interest, taxes, and insurance—PITI) should not exceed 26-28% of GMI (gross monthly income) for conventional loans. For FHA loans, they must be 29% or less.
	4.	Long-term debts are loans that extend longer than 11 months. For most conventional loans, total monthly long-term debt (includes your mortgage payment), should not exceed 33%. FHA allows no more than 41%.

NEEDS ASSESSMENT

Once you have decided to pursue the American Dream of owning a home, enlist the services of a professional REALTOR® (a member in good standing of the National Association of REALTORS®). They understand each phase of the home-buying process as well as laws, mandatory disclosures, and are held to high ethical standards from the National Association of REALTORS®. If fact, whether you buy or sell on your own, the laws require the same legal documents as from a REALTOR®.

Once you have located a REALTOR® with whom you are comfortable, try to come to agreement with what you would want in your home as well as a comfortable spending range. Always consider resale. Although that may not be the main reason for buying, the average family moves every 7-11 years (depending on what resource you look at). Consideration needs to be given to:

	1.	Location—cul-de-sac? Quiet street? Busy thoroughfare—now or in the future? Area of town?
	2.	Style of home—single level vs. split or multiple levels? Contemporary? Ranch? Victorian? Historical?
	3.	Size-Try not to "over buy". There are times when a 1400 sq. ft. home actually has more "space" than a 2500 sq. ft. home simply because of the floor plan.
	4.	Features-Do not purchase the house in the neighborhood with the most features; for example, where it is "overbuilt" for the neighborhood. Consider "perks" such as air conditioning, fireplace, and shop area or bonus rooms.
	5.	Budget - Be realistic. Consider getting into a home and accumulating equity for a couple of years, and then pursuing the "ideal" home.

Once you have listed the features contained in the "ideal" house of your dreams, decide what you can live without. Not every home is going to be absolutely perfect. Agree on what your goal is and seriously reconsider "needs vs. wants".

TIME TO FIND A REALTOR®

Now that the finances are in place, it's time to find the right REALTOR® for you. Try to avoid the "looked in the phone book" method. Talk to friends and relatives, co-workers, and other trusted people and ask for referrals. Once you have identified a REALTOR(S)®, schedule a consultation/interview with each one.

Remember, they will be working for you. Make sure you feel comfortable with the one selected. Do not be shy about asking for references and checking those references.

Once you feel comfortable and are satisfied with your selection, it will be time to find the home of your dreams!!