Are You Ready to Buy Your First House?
If you’ve followed the eCredable plan to establish strong financial habits, use credit responsibly and show your potential using alternative credit, you might be ready to take the next step in your financial life: buying a house.
Today’s first-time homebuyers need to go back to the basics. First, you need to ask yourself several questions:
Is my credit good enough to buy a home?
- Do I have enough money saved for a down payment?
- What neighborhood do I want to live in?
- What type of home do I want?
- What is my budget?
These questions are just a starting point; you may have dozens more. As a first-time homebuyer, the most important thing is to understand the current real estate market and to know if you’re prepared to enter it.
Make sure your finances are in order
If you are a first-time homebuyer, you should make sure your traditional credit score is more than 720. The higher your credit score, the lower the mortgage interest rate you’ll be able to get.
You should also have saved up at least 20 percent of the value of the home. If you put down less than 20 percent on a home, you will probably have to pay private mortgage insurance (PMI) or a similar payment to get your loan. In some cases, you may have a lump-sum payment owed when you buy the home along with a monthly payment for several years after or for the life of the loan.
Find out where you want to live
If your credit and savings are good enough to buy a home, you next have to focus on buying in a community that will suit your needs now and in the future. You may want to have a wish list and a list of must-haves. If you have an understanding of what you must have versus what you would like, you will be better prepared to make smarter decisions when buying your first home.
Set a reasonable budget
A common first-time homebuyer mistake is forgetting to budget for increased expenses. Remember—the larger the home, the higher the monthly expenses. With a larger home, you’ll have higher heating and cooling bills, higher property taxes and higher repair and maintenance fees. Try to match the size of the home you purchase with the amount of money you will be able to invest in its upkeep.
eCredable can help offset negative information on your traditional credit report
If your credit file could use a little help, your eCredable AMP Credit Report™ may be able to offset negative information by showing the creditor a more complete picture of your credit history by highlighting your verified history of on-time payments. Especially in today’s economic climate, bad things happen to good people. By using your alternative credit file to show a more complete credit profile, your creditor may better understand the circumstances that decreased your traditional credit score.
Your eCredable AMP Credit Report™ is presented in an industry standard format with which creditors are familiar. It can be used by the creditor in underwriting and accessed electronically for credit scoring or other purposes. You are entitled to use your eCredable AMP Credit Report™ as a stand-alone report or as a supplement to the Bill Payments contained in your Equifax, Experian, and TransUnion credit reports; by law, a creditor must consider your eCredable AMP Credit Report™ on your request.
Additionally, all creditors must, by law (ECOA Section 202.6(b)(6)) and on your request, consider alternative credit information if they use a credit report in assessing the creditworthiness of their applicants and customers. Many major entities such Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) readily recognize the importance of alternative credit information. Many credit unions also readily recognize alternative credit information as a valuable asset in assessing their member’s creditworthiness. Other major financial institutions and service providers weigh alternative credit information in their lending process.
Visit the eCredable FAQ for more information on how to submit your AMP Credit Report™ to potential mortgage lenders.
Caveat emptor—let the buyer beware
As the saying goes, in real estate, “let the buyer beware.” Once you’re ready to start looking for your first home, make sure you get a good inspector to take a look at the home you are buying, a good attorney to review your documentation and a good real estate agent to help you navigate the transaction. Following these simple steps should help you to have a pleasant home-buying experience.