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Do Your Homework

Before you actually start looking for houses, you need to get all your ducks in a row:

Check your credit score

If you are thinking of financing the purchase of your home, we recommend that you take concrete steps months before you actually want to be in your new home, to bolster your credit score (called “FICO”). A minimum score of 620 is typically required by lenders these days to approve you for a suitable loan.

Apply for a loan

We advise our clients to go through the motions of a loan application 6 months before the expected purchase, since the process itself can uncover items that need time to be corrected. Not only that the lender will check your FICO credit score and suggest ways to improve it, but he will also let you know how much house you can afford, what type of loan you qualify for, and at what interest rate. The application process can also uncover “derogatory” information like prior collections, identity theft our other irregularities that you may not even be aware of.

Save some cash

Most of the widely-available loans will require between 3 – 5% downpayment, plus some closing costs. Unless you are a first-time homebuyer and qualify for some type of downpayment assistance program, you will need to have some liquid reserves to be able to close a purchase transaction. This step may involve changing some spending habits, sticking to a budget, and delaying that dream vacation to Hawaii that you always wanted!

Get your financial documents ready

Start a file going, which will contain financial statements for bank accounts, investment portfolios, credit cards, insurance policies, and current loans. Other documents that you will need include recent pay stubs, tax returns for the last two years, and other.

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