Somebody pinch me please!!!!
After a grueling past couple of months and tons of paperwork, I can finally say that I am a PROUD homeowner!!! I would be lying if I said that this has been an easy process but it was so worth it, you guys! For someone who started this journey with downright BAD credit, I had a long road ahead. But I was ready and willing to do whatever was necessary to achieve my goal of being a homeowner. Are you on that same path? Are you ready to make one of the biggest investments of your life but you’re unsure about the required steps? Allow me to walk you through a detailed step-by-step guideline that’ll set you well on your way of becoming a homeowner.
First Things First…
There are many steps involved in the process of buying a house. The first thing you need to know is what your credit/FICO score is . Knowing where you stand credit wise is key and very essential in the house buying process. It is always a good practice to be aware of your scores as well as the information being reported on your credit report. Sometimes inaccurate information can be reported and will go unnoticed if you aren’t keeping track of these things. Some great tools to use to track for credit report accuracy are:
- Credit Karma– a great FREE tool to check on the accuracy of what is being reported on your report. This app will provide information for Transunion and Equifax. While I love this app for keeping track of what is reported, be aware that their scoring is extremely off! DO NOT rely on this app for accurate scoring.
- MyFICO– this is probably my favorite credit service because of its accuracy and the fact that it provides actual FICO scores that mortgage companies use. With that being said, it is not free. For a report and scores for all 3 bureaus, I paid $54 monthly. You do have the option of monthly or quarterly reporting. I chose monthly because I was buying a house.
- Myfreeannualcreditreport– with this service, you are allowed a free credit report annually or once a year.
Once you select the service(s) that you wish to use, now its time to analyze what you have and see what needs to be handled. If you are in a situation like i was where you find yourself with bad credit, look for these things:
- Do you have any collections?
- Do you have any rolling late payments? These are your 60-90 late payments. These really hurt your score.
- Do you have several hard inquiries? This is when you apply for a line of credit and the creditor does a hard check. These can hurt your score but typically fall off in 2 years.
- Do you carry high balances on your credit card? Are you using more than 30% of your limit?
- What does your DTI or debt-to-income ratio look like?
Knowing all of this information is very important and will save you and your loan officer time. DO NOT pay for credit repair. This can be done on your own with determination and patience. If you have any collections, call the company and see what they will accept to settle your account. Also, make sure that they verbalize that they will remove the collection from your report and settle to a $0 balance after payment is received.
Once you start the journey of purchasing a house, DO NOT miss any payments, overdraft your account or apply for any new lines of credit.
A little secret that will help boost your score is secured or unsecured credit cards. If your credit is subpar, you may qualify for an unsecured card where you have to put money up first and that will determine your limit. After sometime, you could be eligible for a secured card and an increased limit. Check with your bank or local credit union to see your options.
Pack Your Patience
When you’re dealing with credit repair, it takes time!! Jumping 100+ points doesn’t happen overnight so keep that in mind when purchasing. Make sure you have a secure place to stay for at least a year. Also, paying off the necessary debt takes time and money, so to avoid exhausting yourself mentally and financially, set a timeline and stick to it. Depending on your situation, 1-2 years is a goo goal to aim for. 🙂
Remember, depending on your credit situation and finances, this could take some time and lots of work. Only you can determine how bad you want this and you have to do the work.
What Is Your DTI (Debt to Income)Ratio?
Knowing your DTI before reaching out to a loan officer is helpful but if you don’t know, most officers will tell you where you stand and what you qualify for. This was my exact situation. I knew that i wanted to buy a house but I didn’t really know what was needed behind the scenes. I was really blessed to have found the best mortgage company in my area. Working with Sonya at Premier Nationwide Lending was such a great experience. She was extremely knowledgeable about her work and it was always evident that she cared about me as a client. When making the biggest purchase of your life, knowing that you have a well-informed attentive loan officer really eases the anxiety that you are sure to experience in this process.
Do You Have Steady Income?
When financing a home, you will need to verify your income and have a steady work history. Typically 2 years or more at a job will be accepted. Your income and your DTI will all determine what you will qualify for. With that being said, what you qualify for and what you can afford are two totally different things that you need to keep in mind. Yes, you may qualify for a $200k home but can you afford it? Thats the real question.
Make sure you’re able to verify your place of employment and that you are able to provide pay stubs and tax returns. You may have to provide pay stubs more than once, once you start the process.
How Does Your Bank Account Look?
As superficial as it may sound, the status of you bank can make or break this process if not ruin it all together. Are you constantly overdrafting your account? Are there large sums of money being moved around? Do you have suspicious deposits? All of these things can raise flags in the Underwriting process and could result in your loan application being denied.
You want to make sure you have funds secured for the costs that you as the buyer may have to cover.
Try to avoid overdrafts and make sure you have a Savings established. You want to be prepared in the event you have to cover closing costs or any other expenses that may arise in the process. It doesn’t have to be 6 figures but a little nest egg would be recommended. After all, you are buying a house!!
Time To Get Preapproved
Preapproval is very important because it tells you what you qualify for. Knowing what you qualify for is important because you don’t want to shop for a house that you can’t afford nor do you want to waste your time. Once you have the preapproval letter in hand, its time to go SHOPPING!!!
Down Payment Assistance
If you need down payment assistance, they are many programs around that can help. Depending on your job or income, there may be a program for you. If you’re a first time home-buyer, an FHA loan may be best for you.
Is A Realtor Necessary?
This is a pretty controversial question because some people are all about working with a realtor while others prefer to cut out the middle man and find their own home. I personally decided to work with a realtor and I am so glad I did. In my search for a realtor, I decided to work with Ashley Cochran with Charleston Southern Homes.
Having a realtor is, in my opinion, very essential. Not only will they send you results tailored specifically to the type of home you’re looking for, they will also handle all of the negotiations, paperwork and jargon that you just don’t have time to handle. A good realtor will answer all of your questions and make sure you have what you’re looking for. I found all of this to be true during my experience with Ashley. She was very attentive to each and every one of my concerns and she exhibited the patience of an angel!! I would recommend her to anyone who desires to buy a home.
Found Your Home? Whats Next?
- Negotiations- After finding your house, your realtor will step in and negotiate the sales price with the seller and their realtor. This is also the time where your realtor can negotiate to get your closing costs paid for by the seller and possibly the home warranty. A good realtor will get you as much as possible.
- Home Inspection– Home inspections are optional but its good to have. These usually run between $200 $ $400. The inspector will inspect the house fully and will provide you with the report. Your realtor will then send any mishaps to the seller and discuss if they will be willing to fix anything that came up in the report.
- Appraisal– The appraisal determines the value of the house. The price of this varies. If the appraisal comes in low, the lender will either deny the loan or your realtor will negotiate and see if the seller will accept the appraisal value. If the appraisal comes in high, that’s great for you! You just gained equity going into a new home. The results of the appraisal are shared between you and your realtor. The seller will not have this information.
- Closing– Once all of the aforementioned steps are complete and no other issues has arisen, you will be ready to close. At closing, you will be met by the closing attorney, your lender and your realtor. The seller may be present as well but its not totally common. The attorney will go over the terms of your mortgage loan as well as well as any other fees that were paid. Your lender may follow suit to further explain your loan and closing costs.
Congrats, You’re a Homeowner!
You have jumped leaps and bounds to get the house of your dreams and you’ve made it to the finish line!!! You’re a homeowner!!! Enjoy your new home and be sure to register and share your registry with your friends and family! Now, go enjoy shopping for house decor. 🙂
I hope you all enjoyed this detailed overview of how I purchased my first home and that you’ll be able to reference this when you decide to make the best investment of your life. You wont regret it! As always, Be blessed and stay safe. XoXo