Monday, April 10, 2006
Buying a House Is Pretty Complicated If...
...you're not prepared. I just took a class, and thought I'd share some of the things I learned...It was a really intro class, so I apologize if some of what I have to say is a little pre-K-ish.
- Find your own class! Especially if you're new to the whole process. My credit union offered free classes.
- Did you know FICO stood for Fair Isaac's Co.? The company that created the equation.
The breakdown:
35% Payment History
15% Length of Credit History
30% Amounts Owed
10% New Credit
10% Types of Credit Used
I wish I knew more about this magical forumla! I later found breakdown information is posted at myfico.com. Although they still don't tell you the magic formula.
- Why do they keep the FICO equation secret? Actually, how did they keep it secret for so long. How are people to improve their scores if they really don't know how it's calculated.
- The speaker didn't give an indication as to when they would start looking at the new Vantage scores.
I've never purchased a house...but the general process doesn't seem all that bad if you're prepared. On the other hand, if you're not prepared, wow. I never knew where to start, but after taking the class, I at least have an idea now...Well, here's the basic process...I'm sure it could be a lot more complicated:
1. Pre-Qualify!
2. Find a Realtor.
3. Think about insurance coverage.
4. Morgage Broker (can shop around for you)
5. Find a house.
5a. Home inspection.
6. Make offer.
7. Counter offer if applicable.
8. Enter "contract period".
9. Contact loan officer to apply and get formal letter with amount of loan.
10. Get "Good Faith" loan.
11. Lock in interest rate. You can actually lock in advance, you just need to know amount of loan. The longer the period you lock a rate, the higher interest you pay...15, 30, 45, and 60 day locks are typical. If rates go down, it is possible to adjust, but it is not very easy. Rates are almost like gambling really.
12. Appraisal is requested to confirm value of house.
13. Escrow established to handle the cash flow between buyer, seller, and various agencies that fees are due.
14. Proof of insurance required.
15. Signing of all paperwork scheduled at escrow.
16. Funding of mortgage happens.
17. Recording of the new mortgage loan, thus you become a homeowner!
18. Maintain. :)
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2 comments:
Don't forget to get a home inspection before you make your offer, we're thinking of getting one on our rental house to find out for sure what needs fixing.
We took a first-time homebuyers class a few years back just to see what we would be getting into when and if we ever bought our rental house and I really feel that it could have been a 2 day class instead of a 4 hour class. We came home just dazed by all the information that was presented.
Oh yeah, that's sort of important *sarcasm*...how the heck did I forget that? I have to revise the list...
About the home inspection...I actually found out that you could request that after you make your offer too...It's a good way to have some "outs" just in case...like if they the inspector finds anything wrong, they can all be used as outs. I don't know if that's ethically okay though...I'd probably prefer getting the inspection first, just to lessen the frustration of the whole process anyway...
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