How Easy is it to Buy a Home?

by : Karen Hoeve

It is really quite easy to buy a home, and it is also a great idea right now, but what are the pitfalls involved? Well we all know the obvious foreclosure risks; I think most of us have read enough of that in the newspapers.

We can leave all that behind us now, because most of the laws governing risky loans have been cleaned up, and, in any case, there is a way to make sure that this will not happen to you. It is called a fixed rate mortgage and the amount you pay can be locked in for the number of years that you specify. (More on that later.)

First let us see how easy it is to buy a house. The number one thing you need here is a credit rating. If you have been paying all your bills on time, or have a good reason why you had a lapse and are now recovered, then you are in with a chance!

It does not matter how small your credit bills are each month, what matters is whether they have been paid on time or whether the minimum payment was paid each month. Even if your credit card limit is only $200.00 (is there such a credit card?) then if it has been kept up to date you have a good credit rating.

So first thing on your list is to check your credit rating; this should be on everyone's list because credit bureaus sometimes make errors on recording credit histories.

If your credit rating is imperfect then you must take steps to clean it up and to get a new credit card to start building credit. Often you can get practical help with this through a government sponsored agency, or a debt consolidating business. You can also go to a bank.

It is better to go to a bank and take out a loan to pay off your credit rating than it is to leave the debt in your credit history record. Once your credit rating is paid off you will need a credit card.

Most national banks will let you deposit a certain amount with them (say $500.00) and you can buy a credit card from them to the value of the deposit. You must not spend over the limit and you must keep the payments up to date. After about eight months of good credit you can try a mortgage broker and explain your position and see if you can qualify.

This brings us to the next step, finding a reliable financier and one who specializes in your required type of financing. Best place to start is your own local bank. It is also a good idea to visit a few financiers and let them give you a quote for the type of mortgage that you can qualify for.

This service is free and there is no obligation as most people 'shop around'; you may have to sign a paper to let them check your credit rating. Do not sign anything else; you also only want quotes for fixed mortgages (preferably that run for the minimum of a five year term).

This means that whatever you pay per month will stay that way for five years. Do not be tempted away from this plan by lower interest rates that are not fixed rates. Variable rate and 'other' rate types can rise unexpectedly and suddenly cost more in monthly payments. This part of it can take a while, as it is better to only deal with one broker at a time.

Once you have found a mortgage company that likes you and you like it, you can request a letter from them saying you are 'pre-approved'. This means that the finance company or bank approves you in theory, but they still have to agree with any house you may chose.

If a house is too old, or near a flood plain, or over-priced - or for whatever reason - it is not wholly approved, they may not wish to give you 95% of the value. They may only offer 75%, or they may say 'get the roof done' and then they will extend the loan. However, this 'pre-approved' letter means that you are one jump ahead of any other buyer making an offer who is not yet pre-approved.

That is the first long leg of the job done. Some of the other pointers like what type of property are you looking for and what type of realtor should you use are fairly subjective. One thing to consider is whether the house will 're-sell' easily at a future date.You will also need to ask your lawyer (in writing) to check any easements or future plans for the neighborhood.

One tip in looking for a realtor is make sure you can access his web pages easily and that you like his/her personality. If you are looking for foreclosed properties you will want an agent that is experienced in this field.

If you are considering this route, sit down with your real estate agent and also your lawyer and ask him/her to explain the procedures with you, it is a little more complex than buying a house the usual way.

The easy part comes now because your real estate agent will take you through most of the next steps. Making an offer, depositing a down payment, arranging a home inspection etc., in all these things you will guided by your agent.

If you find that you can only be pre-approved for a low amount which will not afford you a house, then you need to save more money. The only way you can find out what your chances are - is by inquiring!