How To Purchase a Home - A Guide

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If you're in the market for a home, whether it be your first, or fifth, there are a few things that you'll need to do in order to maximize your bargaining power.

Without question, the most important thing you can do is to sort out your finances. Start, by obtaining a copy of your credit report, and carefully screen it for errors. Yes, these people make mistakes as well, and it can cause you some embarrassing moments when you're looking for a loan.

Once you've screened your credit report and fixed any errors, it's time to get a pre-approval from a lender of your choice. There are a lot of misconceptions regarding pre-approval. This confusion is often exacerbated by the lenders themselves. Wanting to gain as much business as possible, they sometimes leave out important points to consider.

In order to clear up these misconceptions, we'd like to offer a couple of definitions:

• Pre-qualification - This is the easy part. Pre-qualification may be obtained over the phone with most lenders. Pre-qualification merely requires that you verbally discuss your finances, assets and liabilities with a lender. Based on your conversation, the lender will give you an amount that you should be able to borrow. While this is good information to know, it's virtually useless when attempting to negotiate the best deal on a home purchase.
  
• Pre-approval - Obtaining pre-approval is the process of proving to your lender that all the information you provided them during pre-qualification is complete and accurate. This will require that you meet with your lender with the documents they need to prove your financial status. Sometimes, an error on your credit report can cause them to turn down your loan request after the initial pre-qualification. It's important to do your homework by obtaining and screening your credit report before meeting with your lender.

To obtain a free copy of your credit report, go to www.themesarosteam.com and click on the button in the left hand column under the heading "Mortgage Info" then choose "Free Credit Report". You'll be taken to a site provided by the three major credit reporting agencies, and given the options of ordering your free report either online, via postal mail or over the phone.

This is a valuable service, and a free report may be obtained from each of the three agencies once a year. It's not a bad idea to do this anyway, as it is a tool you can use to help fight identity theft. Be advised, if you order from all three at once, you're done for the year.

Upon successfully obtaining a pre-approval, your lender will issue a pre-approval letter which defines the amount you are approved to borrow. There is usually a thirty day period where the pre-approval will be honored. If you go beyond thirty days, you'll have to talk to your lender and update them on any changes.

A word of caution here: Don't make any changes to your financial situation until you've successfully purchased your home. Changes to avoid that may cause your pre-approval to lose it's validity are:

• Change in Employment
• Student Loans
• Large Purchases
• Change in marital status
• Co-signing on another loan

The list is by no means conclusive, but the idea is not to change your financial picture prior to getting into your new home.