If you’re ready to make that leap to home ownership, there are 4 things that you need to do before even getting in the car to take a look at that first house.

1) Pre-approval for a home loan – If you are serious about buying, talking to a loan officer or mortgage broker and getting pre-approved for a loan should be the first step.  You will know how much home you can afford and begin to really focus your home search.  But most importantly, with a pre-approval letter from the bank, you will be able to submit an offer on a home more quickly as most home sellers require a pre-approval letter with offers.

2) Collect Pay Stubs, Bank Statements and Tax Returns – Banks need these in order to process your loan.  Keep the last 6 months of pay stubs, print out your bank statements from the past year and print out the past 2 years of tax returns.  Having these handy will speed up the loan process and help ensure all deadlines are met when you put a home under contract.

3) Don’t Make Any Big Credit Purchases – Your credit score is checked 2 times during the purchase of the home.  The first is during the loan approval process.  The next is right before closing which could be 30, 45 or even 65+ days after the approval process.  If there’s a big purchase that hasn’t been paid off, delinquent bills or anything else that might affect your credit it could create problems in getting the loan and in you getting your home.

4) Save Cash In Order to Pay Closing Costs – Depending on the type of loan you get, you’ll need to pay 10%-30% of the total sales price in cash at the closing table.  On top of that, there are other lenders fees, inspection fees and sometimes title company fees that you will need to pay in cash.  It’s smart to get a Good Faith Estimate from your loan officer or mortgage broker in order to know how much cash you will need at the closing table.

If you have more questions on the buying process, feel free to give Chuck Stephens, our buying expert, a call at 512-947-8077 or drop him an email at cstephens@cbunited.com

If you buy in the next two weeks, our mortgage partner, Joe Brown of Sente Mortgage, can complete most conventional loans by the deadline to receive the tax credit. You can contact him by clicking the on the above link or contact us today with any of your questions. Don’t miss out!

“…let’s assume a loan amount today of $100,000 with a 30-year fixed-rate residential loan at 5 percent. Nationwide at the time of this writing, the average 30-year rate was 4.85 percent per Freddie Mac. Fannie Mae forecasts an average rate in all of 2009 of 5.13 percent. So the 5 percent is a reasonable assumption.

So if rates go up just 1 percent to 6 percent per year, then prices must drop at least 10 percent for that same buyer to qualify for the same monthly payment. A 1.5 percent increase in rates to 6.5 percent requires a 15 percent price decline, and a 2 percent increase necessitates a 20 percent price decline to qualify. Note: This 1 percent interest rate change to a 10 percent price change is only true when interest rates are 5 percent as they are today.”

Interest rates vs. price changes

Admittedly, at the same loan-to-value ratio, as prices decline so does the down payment. Since, however, many buyers select the price range of homes they consider buying based on their monthly payment potential, rising rates may force future buyers into less expensive homes and hence properties they find less desirable.

So, if you are waiting to buy your first home or if you are waiting to make that second home investment – don’t wait much longer! Postponing that purchase is going to price you out of the market and you are going to have to settle for something less or just wait for the next recession. Don’t get burned. Thanks to Ted Jones for letting us reprint part of his blog which can be found here.