The holidays are rapidly approaching. As the year winds down and you anticipate spending well-earned time celebrating with family and friends, there are some things those planning to purchase a home should do with your downtime before 2017 is upon us.
1. Check your credit report
Image by Mufidah Kassalias / Flickr
The Fair Credit Reporting Act (FCRA) requires the three nationwide credit reporting bureaus to provide you with a free copy of your credit report once every 12 months, upon your request. The three companies have set up a central website, a toll-free number (1-877-322-8228), and a mailing address (Annual Credit Request Service, P.O. Box 105281, Atlanta, GA 30348-5281) where you can send your form. The Federal Trade Commission (FTC), which enforces the FCRA, recommends you go through one of these three methods to obtain your free credit report, rather than contacting the individual companies.
Your credit report provides your score, which you should know. The higher the score, the better you will be seen in the eyes of lenders. It ranges from 300 to 850, and anything above 750 is considered “excellent.” This number will help you determine how easily you will qualify for a loan, and if you will receive the most favorable rate. Beyond that, the report also shows your credit history. Even if you are not applying for a loan shortly, it is a good idea to obtain your free credit report to check the information is correct.
2. Clear up any discrepancies
Obtaining your credit report also allows you time to clear up any discrepancies. The bureaus may have made an error, or it may not be up-to-date. These issues tend to take time to correct. Therefore, the quicker you alert the parties, the better. The credit bureaus typically must investigate your claim within 30 days.
If you believe there is an error, contact the credit bureau and the organization that provided the information (e.g. the credit card company). Inform the credit bureau what you believe is inaccurate. You should be specific and state why you are disputing the information. It is also recommended that you inform the creditor that you are disputing the claim.
3. Compile your financials
In this festive season, the last thing you want to think about is your financial statements. However, the lending institution is going to ask for your pay stubs, W-2 forms, copies of your brokerage and bank statements, recent pay stubs, and any other assets you may own. You need some of this information for your taxes, so consider it killing two birds with one stone.
Compiling a list and organizing yourself now will make it easier in the new year when you approach a lender about pre-qualifying for a mortgage. If you are considering purchasing a co-op, it is likely you will need this information when you present your financial condition to the board.
4. Make a budget
It is a good idea to decide how much you want to spend on monthly housing costs (e.g. mortgage, common/maintenance charges, utilities, etc.). Your lender and realtor will help you decide what you will qualify for, but you may decide to be more conservative. Based on your income, ballpark your expenses (e.g. student loan payments, commuting, travel). After this, you can estimate how much your mortgage will be based on different rates, along with maintenance or common charges based on the average in the neighborhood you are seeking to buy an apartment in. There are several websites that have mortgage calculators.
5. Find a Buyers Agent
We have discussed the importance of working with an exclusive buyers agent. He or she has a legal obligation to look after your interests. Beyond that, you should work with someone that you are comfortable with, and who understands your needs and wants. When interviewing agents, he/she should listen to you, and provide you with realistic advice. However, if an agent keeps talking about three bedroom condos when you want a one bedroom co-op, you should probably keep looking for someone else to help you.
Taking time to do these steps will help your search in the coming weeks. Before you know it, 2017 will be upon us, and you will be prepared to kick your home search in high gear while others are making resolution lists.