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Buying a home can be an emotional, time-consuming, complex process. There are a few things that you can do to help make the process as smooth as possible:
1. Check your credit. Before you apply for a home loan, regardless of your credit, it's a smart idea to obtain copies of your credit report from the three major credit bureaus and review the information. If there are errors or things that need to be addressed, it's easier to address them before finding the home of your dreams, than after you have found a home and are trying to close on your loan.
If you know you've got a few blemishes on your credit, let your lender know what they are, why they happened, and why you are a still good credit risk. Lenders look at your credit to determine how likely you are to be able repay the loan. Explain any extenuating circumstances - like the loss of a job or unexpected major medical bills - so they understand that it is unlikely to happen again in the future.
2. Get approved before you buy. An approval means that a lender has reviewed your credit history, verified your assets and employment, and has approved your loan before you have found a home to purchase. As long as the home appraises for at least the purchase price, your loan should close.
Getting pre-approved also gives you an advantage over other buyers. When it comes to negotiating price, a seller is likely to be much more willing to negotiate with you than with a person who is not preapproved or is merely "pre-qualified."
While getting pre-qualified may sound official, it really just means getting an idea of what you can afford. You have the agent plug in a few numbers that you give them - your monthly income and your monthly debt - and they calculate an appropriate payment. From the payment amount, the calculator can approximate the price range for homes you can afford. But none of your information or credit history is verified. Because niether your assets, income, nor credit is not verified, a pre-qualification really has little value when it comes to purchasing a home.
3. Find a great buyer's agent. Traditionally, real estate agents represent the sellers in a transaction. When you are working someone who is not specifically a buyer's agent, they are less likely to negotiate the best price or contingencies for you.
A buyer's agent's job and fiduciary responsibility (meaning legal duty with respect to your money) is to you, the buyer. Before working with an agent, establish whether they are a buyer's agent or a seller's agent. After spending a lot of time with a REALTOR, it's natural to feel like you and they have become a team. But if they are not negotiating on your behalf, then they're not really on your team, nor are they looking out for your best interests.
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