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Six Crucial Steps to Buying a Home

By Elizabeth R. Elstien

So, you've saved up a down payment and now you're ready to buy a home. Before picking up the phone and calling one of our fantastic agents, take these first steps to make the home-buying process easier.

Step 1: Get your paperwork in order. Unless you intend on paying cash for your home, you will need a loan. Collect paystubs or self-employment records, income tax returns, bank account statements, along with documentation of assets (e.g., vehicles, 401K account) and expenses (e.g., rental lease, utility bills).

Step 2: Get Preapproved. Do you have bad credit or an unusual income situation? There are direct lenders and home loan brokers who work with many different lenders and home-buying programs. Research lenders to see who has the best program(s) for your situation. When you find a lender you want to work with, ask her/him to send you the loan application and list of documents needed, so you will have all paperwork ready before you meet. If you are buying a custom home and lot in a new subdivision, you will use the builder's lender in most cases. Once you submit your mortgage application, the bank will determine, based on your credit health, income and other factors, whether they can offer you financing, and if so, how much. Approved applicants will be issued a preapproval letter. This letter will outline how much the bank can offer you, essentially providing you with a budget that will guide your home search.

Step 3: Decide what you are looking for in a home. This is a very important step and will save time looking at homes that don't fit the bill. Organize and type a "wish list" that outlines your "wants" and "needs." Do you want a house, condo or townhome? Choose number of stories and decide if you want a new construction or something a few years old. Choose two or three of your most important home aspects, such as a large kitchen, big backyard or three-car garage. Print the completed list to have ready to give to your real estate agent when you meet. Have some flexibility; you may not find your dream home, but you can make any home your own.

Step 4: Know the area you want to live in. If you have kids, research schools and parks. Check crime rates and get out and talk to those living in the area. Be realistic about the prospective area. Choosing an area with homes too expensive for your budget will be a waste of time.

Step 5: Wait for lender pre-approval of loan amount The pre-approval should list all fees associated with the loan. Keep in mind that the amount given is the most the lender will loan you. Check your budget to determine the amount you can realistically afford, as it is often less than the pre-approved amount. Final figures will depend on the purchase price of the home you buy plus any contractual details agreed on, such as Seller agrees to pay for one year home warranty.

Step 6: Maintain your credit. Before and after pre-approval, promptly pay all credit cards and other bills. Avoid large purchases that will drag your credit down. Don't be tempted to apply for a new credit card or vehicle. Remember, you only have loan pre-approval. Final approval won't come until much later and your credit will be run again. If your credit has declined, you will lose the loan and the home.

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About The Author

Elizabeth R. Elstien has worked in real estate for over 15 years as a real estate...

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