The real estate downturn of the mid-2000s is mostly over and the market is heating up, with prices rising in all over the U.S. In Wisconsin, the real estate market might be even healthier than in other locales, with new and existing home prices expected to rise 2.4 percent by early 2016. It might just be the perfect time to buy, but before you make any offers, you need to do a little planning to make sure you can pay out over the long run, especially if it's your first home.
Do you have good credit? Do you know what good credit is or the factors that affect your credit? Have you had late payments, bankruptcies, judgments or other liens? If the answer is yes, the first step is to work on your credit score and report. Up until just recently, access to your credit score and full report was granted after putting down credit card info for a "free trial." that you would have to cancel right away to avoid a costly fee. Now, you can access your score and report for free, so there's no excuse for not knowing what's happening with your finances. Your FICO scores are ordered separately, usually for a nominal fee. Check it for discrepancies or old information. Much of the time you can contact the lender directly to resolve these issues. Or, contact the bureau and use their dispute resolution process. Most mortgage loan programs require a 640 score or higher, so fixing errors or having old information removed can make a big difference.
Do you have money for a down payment or closing costs? If not, how long will it take you to save? Start now. Make a commitment to stash funds away each month to help you meet your goal. Some loan programs are still available for 0% down but watch out for those; if the market should falter again you don’t want to owe more on the home than it’s worth. It also goes without saying that you want to refrain from big purchases that require credit, such as buying a new car, until after the home purchase process is over.
Owning a home is touted as a big factor in achieving the American dream, but it's not for everyone. Ask yourself:
Am I prepared for expenses like home repairs and landscape maintenance? Am I at risk for job relocation? Am I able to stay in one place for three to five years?
Resist the urge to call your realtor first. Instead, speak with a lender or two to find the best program. There are many loan products and even more lending institutions so it's worth shopping around for the lowest rate. A good lender will also advise you on the best ways to protect your credit while you a preparing to buy a house, which might include ID monitoring and credit report monitoring to ensure that someone else isn't using your good credit or your identity while you working on purchasing your home.
Use a mortgage worksheet to keep track of the information you receive from various lenders. It can be a dizzying amount of numbers and differences so keeping them in one place is important. When you are within 60 days of purchasing, your lender will issue a pre-approval letter for the amount you qualify for. Now you can call your Realtor and look for your dream home.