How I bought My First House

Buying a house is an exciting journey and really depends on your financial situation. Look to no one else but yourself and your immediate family's financial situation to determine whether you are able to purchase a house and the responsibility that comes with it.

If you have enough cash saved up to purchase your home outright without needing a mortgage then go ahead. You will certainly save a lot of money in interest. Many of us however do not have this ability and will need to apply for a mortgage. In doing so, you will have the option to put some money down or none at all depending on your credit score and the type of loan you qualify for.

So, you must be wondering, how I did it? Here we go, keep reading below.

1. Your Credit Score & Credit Profile

Before applying for a mortgage, the first thing you need to do is know where you stand regarding your credit score and credit report. Don't wait to be surprised when your loan officer presents your report. I used Annualcreditreport.com to obtain a free copy of my credit report. You are only allowed to check your credit once during the year through AnnualCreditReport. If you have already used the site, you can also obtain your credit report for free from Experian. If the report is confusing, you can take your report and visit a loan officer at your local credit union or Bank for a free consultation. They will review the report closely with you and provide guidance on what you need to do in order to be an attractive candidate for a Mortgage. Read our step by step guide here on cleaning up your Credit Report to qualify for a mortgage.

2. Mortgage Type

You will need to make a decision on the type of mortgage you prefer. Think about how much money you have saved up to purchase a home. How much money can you afford as a downpayment on the house, 3%, 20% etc. In addition to the downpayment you will also be responsible for paying closing costs. You can get an estimate of your closing costs from your financial institution. In obtaining a mortgage, there are two types of loans you can apply for.

FHA: This type of loan is created under the Fair Housing Act and provides the opportunity for home buyers with less than ideal credit as well as downpayment to qualify for a mortgage that they would not be eligible for otherwise a standard conventional mortgage application. Essentially, this is great if you do not have a whole lot saved up as a downpayment since the FHA allows you to put as little as 3% downpayment on a new home. Similarly, the credit requirements are low at a minimum required credit score of 580. More details about an FHA loan can be found here.

Conventional/Standard Loan: This type of loan requires a strong credit score as well as credit history. Lenders under a conventional loan will typically require at least a 20% down payment. In various situations, you can be allowed less.

3. Get a Pre-Qualification/Pre-Approval Letter.

You have weight your options on the type of loan and you have visited and worked on your credit score and report. You are ready for the next step. A pre-qualification or pre-approval letter gives you an idea of how much you can spend on a house based on your financial situation. It also tells the realtor that you are serious about viewing and subsequently placing an offer on a home. Let's talk about the difference between the two. Your financial institution will provide you with a pre-qualification letter stating how much money they think you can afford to spend after reviewing your financial history (Assets, Income, Debts). The Pre-Approval does the same except it goes a step further to verify your financial history as well as perform a Credit Inquiry, reviewing your credit score and your full credit report. This is also known as a Hard Pull. This Hard pull will show up on your credit report for 2 years and will affect your credit score in a minimal way.

4. Find Your Dream Home

I spent 1 year searching for my dream home. Initially, I really thought that I could go at it alone. Don't be like me, find a realtor that you trust to assist you in finding your home who will guide you along this long tedious journey. You may need to interview several realtors before coming to a final decision and that is ok. You deserve the best, do not compromise. It is also very important to plan and make a list of everything you want in a home including deal breakers such as location, taxes and price.

5. Home Inspection

A Home Inspection protects you and should never be skipped under any circumstance. Once you have found your dream home and an offer has been placed on the house, your next step is to find a reputable Home Inspector. There are many independent sites such as Angie's List where you may find a Home Inspector. My Home Inspection Revealed a few small Issues which I was successfully able to negotiate with the seller to fix. Skipping a Home Inspection means that you are buying the house 'as is' and any major issues arising after the purchase is final, are your responsibility. You will not be able to return to the seller and negotiate any repairs.

6. Closing & Enjoy

If you have made it this far, you deserve a champagne toast. Buying a home is not an easy feat. You are almost there. At this point, you have found your dream home, it has successfully gone through and passed the inspection process and all is well. Sign the papers and be on your way to enjoying your new Investment.

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The Writer can be reached by email at: Deana@organikcredit.com

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