Buying a property is a process - not a task.
Buying a property is a process -not a task. It takes research, planning, preparation and a focused search combined with timely response and execution to get the best value and smoothest transaction. Here is a partial checklist to help you prepare:
- If buying with cash, you must show proof of funds. Proof of funds can be in the form of a certified letter from your bank or copies of your most recent bank statements
- If financing, check your current credit ratings. You should check your credit ratings with the three major credit reporting agencies (Experian, Equifax, Trans-Union). The higher average credit scores (over 700), result in lower financing costs and interest rates.
- If credit ratings are low, clear all major revolving debts to improve your credit scores. It is good to reduce or clean revolving debts about six months before applying for a mortgage. DO NOT LEASE A CAR OR OTHER MAJOR EQUIPMENT PRIOR TO APPLYING FOR A MORTGAGE.
- Prepare a file with financial information needed for mortgage application. You will need the following:
1. Two most recent pay stubs.
2. Two most recent monthly Bank Statements.
3. Two most recent Investment and Retirement Account Statements.
4. Two most recent Tax Returns.
5. If self employed two most recent business tax returns & year to date Profit/Loss Statement.
- Choose a reputable full time Realtor to help you find your property. For most people the home is their biggest single purchase or investment. You don’t want to trust your biggest investment to a friend or family member who does real estate as a hobby or part time job – you want a real estate professional.
- Choose a reputable mortgage company or bank. Get a pre-approval letter from the lender – with recent problems in the mortgage market many sellers don’t accept approval letters from mortgage brokers. After you make an offer, you can shop other lenders for lower rates and loan costs.
- Must have enough cash for deposits and closing expenses. A serious offer is always accompanied with an initial deposit. A second deposit is usually made after the offer is accepted. Offers with higher deposits are considered more seriously, because they demonstrate the buyer’s ability to pay.
- Prepare a buyer’s criteria of the most important factors you want in your property. For most people, the three most important factors are LOCATION, PRICE and SCHOOLS. Other important factors are type and size of property; the number of bedrooms and baths, energy conservation, hurricane protection, security, amenities, etc. We can help you develop such a list.
- If you have to sell your current property to buy a new property, you should coordinate the sale and purchase. In some cases it is possible to close both transactions the same day. However you must make provisions for possible conflicts – we can help you prepare a transition plan.
- If you have to sell your current home, find out what you need to do to prepare to sell. We can provide you a seller’s checklist to prepare for your sale.
- Review the Standard Sale & Purchase Contracts to become familiar with requirements. Request a blank copy from your Realtor.
The cost of financing is directly related to the perceived risk level of the loan. Lenders consider several factors when determining the risk. Among them are the average FICO Scores from the three major credit bureaus (Experian, TransUnion and Equifax); the borrower’s employment history (2 years minimum employment); financial stability (money in the bank), value of the property (as appraised) and down payment.
FICO Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories as outlined below and each has a different value as represented.
The Payment History (35%)
- Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
- Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)
- Severity of delinquency (how long past due)
- Amount past due on delinquent accounts or collection items
- Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)
- Number of past due items on file
- Number of accounts paid as agreed
Amounts Owed (30%)
- Amount owing on accounts
- Amount owing on specific types of accounts
- Lack of a specific type of balance, in some cases
- Number of accounts with balances
- Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
- Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)
Length of Credit History (15%)
- Time since accounts opened
- Time since accounts opened, by specific type of account
- Time since account activity
New Credit (10%)
- Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
- Number of recent credit inquiries
- Time since recent account opening(s), by type of account
- Time since credit inquiry(s)
- Re-establishment of positive credit history following past payment problems
Types of Credit Used (10%)
Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)