Homework essential for buying that first home


Experts say when you believe you have enough money for a down payment, obtaining a pre-approval letter from the lending financial institution can speed the purchasing process along.

Are you considering taking the plunge and buying your first home? If so, you?re not alone. Across the country, owning a home still represents the American dream for many, and the opportunity to buy your first home couldn?t be better.

Declining home prices, increasing numbers of foreclosed properties and unique government stimulus programs are luring potential homeowners into the market.

But purchasing a new home is more challenging than it was just a year or two ago. Relaxed lending standards over the past decade led to one of the greatest housing market booms in the nation?s history and have now contributed to one of the greatest housing market crashes.

Lenders who were previously able to easily lend to most homebuyers have now severely tightened their lending standards, making it more difficult for potential buyers to obtain financing.

If you are still ready to make the jump from renter to homebuyer, here are some tips from FindLaw.com, the world?s leading online source for legal information on how to prepare to purchase your first home.

n Carefully inspect your credit report. Lenders check your credit report to see if you have the means, the capacity and the track record to pay the mortgage on the home you would like to purchase. The better your credit score, the more likely you will obtain a favorable interest rate and terms on a mortgage.

To learn what your credit score currently is, and if your credit report contains mistakes, contact the three major consumer credit reporter companies: Equifax, Experian and TransUnion. The Fair Credit Reporting Act mandates that each of the consumer credit reporting companies must provide you with a free copy of your credit report at your request once every 12 months.

If you find mistakes on a credit report, notify the credit reporting company in writing of the mistake. The reporting companies must, by law, investigate the disputed items unless they find that the dispute is frivolous.

Credit scores are based on a range of 300 to 850 and a score of 700 or more suggests good credit management, according to Experian.

n Become familiar with mortgage terms and conditions. A mortgage is a legal agreement between the lender and the buyer of a home in which the property is collateral for the loan. A lien on the property being purchased secures the promise to repay the loan.

Never sign any legal documents, including a mortgage, if you do not clearly understand the terms and conditions of the agreement.

If you feel pressured to sign a document, walk away and seek the assistance of an attorney or trusted real estate professional.

n Shop around for your loan. Contact at least three financial institutions to obtain information on mortgage rates, terms and conditions for a first-time homebuyer.

When you believe you have enough money for a down payment, obtaining a pre-approval letter from the lending financial institution can speed the purchasing process along.

Sellers may be anxious to sell a property in today?s market, but they?re just as anxious to avoid a buyer who is unable to get a mortgage to pay for their property.

n First-time home-buying programs. As you consider buying your first home, look into local, state and federal programs that may offer financial assistance for first-time homeowners.

Check with your mortgage lender to learn more about, and to see if you qualify for the 2009 first-time homebuyer?s tax credit. The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made before Dec. 1, 2009.

In most circumstances, the 2009 credit does not have to be paid back, but be sure you fully understand your obligations before you count on not paying back the credit. You also may be able to obtain a bridge loan and apply the funds to your closing costs. Additional information is available on the Web at hud.gov and irs.gov. If you?re a military veteran, the Veteran?s Administra?tion also offers special loan programs for which you may qualify.

n Hire a real-estate professional. Buying a home will probably be the largest financial transaction you will make in your lifetime, and it?s a process that can leave you feeling overwhelmed.Most buyers often rely on their real estate agent, loan officer or closing agent to guide them through the purchase process.

If you feel you do not clearly understand the purchasing process, or you would feel more confident if you had additional expertise to make a sound decision, consider hiring an attorney who specializes in real estate law to review and negotiate your offer to the seller, to review your mortgage and closing documents and to be present and represent you at the closing.

Hiring an experienced real estate attorney would be especially useful in dealing with the complexities of purchasing a foreclosed home.

n Do your homework. When shopping for a home, take the time to research neighborhoods where you would like to own a property. There are many online tools to help you research the schools, property taxes and values and crime statistics.

Visit as many open houses as possible in the neighborhood, as well as nearby shops and other facilities that add value to owning a property.

As you narrow down your home choices, work closely with your attorney or real estate professional to obtain a professional inspection of the structures and to understand any disclosures made about the homes.

n Consult with friends and family. Experience is often the best teacher. When you start looking for your first home, consult with a parent or friends who have purchased homes to get their perspective of what to look for in a home and what to expect in terms of ownership and maintenance.

n Co-buying a home. If you?re interested in co-buying a home with a friend or a future spouse or partner, work with a real estate lawyer to clearly define the arrangement and the sharing of the title.

Working things out up front will reduce potential problems if circumstances change.

For more information and tips on buying or selling a home, visit realestate.findlaw.com.


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