California Mortgage Planning
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Six Steps to Buying a Home
There are many pitfalls you can avoid when you are in the market to buy a new home. Here are a few tips and strategies to help you prepare for success.
If you are a move-up buyer, you may wish to start with Selling a Home because many of the answers you receive in that process will impact the decisions you make when buying your next home.
Step 1: Pull your credit report and credit score from all three credit bureaus.
You are entitled to an annual credit report from each bureau and may obtain it by going to www.annualcreditreport.com. While the credit report is free, you will be required to pay a small fee to obtain each credit score. Mortgage interest rates and terms vary based on your credit score so it could save you thousands over the life of your mortgage to correct any credit report errors at this point.
Step 2: Prepare a Budget
Whether you are a first-time home buyer or a move up buyer, it is likely that your new house payment will represent an adjustment in your spending habits. Before getting caught up in the emotional excitement of a new home purchase, it is important to have an accurate picture of your monthly payment comfort level. I have provided a fill-in-the-blank budget outline to help you get started.
It is important to remember that an increased house payment is typically offset by increased income tax deductions so the actual net cash-flow expense may be less dramatic than you anticipate. Analyzing after-tax net house expense is part of the service I offer as a Certified Mortgage Planner.
Step 3: Write down your long-term financial goals
Do you want to fund your children's' education, increase your savings, investment or retirement accounts? Do you want to take the family on an annual vacation? Do you want to buy a vacation home in the future? How soon do you want to retire?
In order to prepare mortgage options and a mortgage plan that helps you achieve your financial goals, it is important to have a list of those specific goals.
Step 4: Get pre-approved for your mortgage financing
Once you have chosen your mortgage professional, it is time to complete a mortgage application (excel format or PDF format) and provide the supporting income and asset documentation as required. Please take a moment to read Credit Do's and Don'ts for a Mortgage Application so you don't unintentionally hurt your ability to receive mortgage loan approval.
As a Certified Mortgage Planner, I compile the information from your budget, your written financial goals, your mortgage application and your supporting documentation to analyze and prepare mortgage options that best suit your financial situation. If you are a first-time home buyer or a move-up buyer wanting a refresher, consider reading Mortgage Terms You Must Know and Understand as a mortgage terminology primer.
I prepare a Current Financial Assessment which reflects your current after-tax cash-flow and demonstrates where you are in the process of attaining your future financial goals. For each mortgage option, I then prepare a Proposed Financial Assessment which demonstrates how your after-tax cash-flow and your future financial goals are impacted by the mortgage. If your new house payment requires a short-term adjustment in saving for future goals, I prepare a step-by-step 5 Year Action Plan to help you catch-up and stay on track toward long-term financial independence.
Upon choosing the mortgage option that most suits you, your mortgage application and supporting documentation is submitted to Underwriting for formal review, approval and a mortgage commitment. This formal review process and the mortgage commitment constitutes a preapproval. If you work with a loan officer that doesn't proceed with the formal review and mortgage commitment, you have been prequalified (regardless of what the loan officer calls it) which has no credibility in the real estate market.
A preapproval means you will get mortgage financing, a prequalification is the loan officer's opinion that you could get mortgage financing.
Step 5: Prepare a realistic "Must Have" and "Want" list for your new home
HUD has a well-rounded Home Buyers Wishlist in PDF format to print and make notes.
Step 6: Choose a qualified Realtor to represent YOUR interests.
If a Realtor's only job function was to drive you around and show you houses (i.e. act as a glorified chauffeur), the onset of the internet as a venue to list homes for sale would have put every one of them out of business. In reality, the high-value functions of a top-notch Realtor are their ability to negotiate and protect YOUR interests.
While you will meet many friendly Realtors holding Open Houses, it is enormously important to interview Realtors for their professional capabilities on your behalf in addition to their personal charisma. You will be depending on this person to negotiate one of the largest personal investments you will ever make.
Meet Wendy Cutrufelli, Certified Mortgage Planner, Realtor
If you are a move-up buyer, you may wish to start with Selling a Home because many of the answers you receive in that process will impact the decisions you make when buying your next home.
Step 1: Pull your credit report and credit score from all three credit bureaus.
You are entitled to an annual credit report from each bureau and may obtain it by going to www.annualcreditreport.com. While the credit report is free, you will be required to pay a small fee to obtain each credit score. Mortgage interest rates and terms vary based on your credit score so it could save you thousands over the life of your mortgage to correct any credit report errors at this point.
Step 2: Prepare a Budget
Whether you are a first-time home buyer or a move up buyer, it is likely that your new house payment will represent an adjustment in your spending habits. Before getting caught up in the emotional excitement of a new home purchase, it is important to have an accurate picture of your monthly payment comfort level. I have provided a fill-in-the-blank budget outline to help you get started.
It is important to remember that an increased house payment is typically offset by increased income tax deductions so the actual net cash-flow expense may be less dramatic than you anticipate. Analyzing after-tax net house expense is part of the service I offer as a Certified Mortgage Planner.
Step 3: Write down your long-term financial goals
Do you want to fund your children's' education, increase your savings, investment or retirement accounts? Do you want to take the family on an annual vacation? Do you want to buy a vacation home in the future? How soon do you want to retire?
In order to prepare mortgage options and a mortgage plan that helps you achieve your financial goals, it is important to have a list of those specific goals.
Step 4: Get pre-approved for your mortgage financing
Once you have chosen your mortgage professional, it is time to complete a mortgage application (excel format or PDF format) and provide the supporting income and asset documentation as required. Please take a moment to read Credit Do's and Don'ts for a Mortgage Application so you don't unintentionally hurt your ability to receive mortgage loan approval.
As a Certified Mortgage Planner, I compile the information from your budget, your written financial goals, your mortgage application and your supporting documentation to analyze and prepare mortgage options that best suit your financial situation. If you are a first-time home buyer or a move-up buyer wanting a refresher, consider reading Mortgage Terms You Must Know and Understand as a mortgage terminology primer.
I prepare a Current Financial Assessment which reflects your current after-tax cash-flow and demonstrates where you are in the process of attaining your future financial goals. For each mortgage option, I then prepare a Proposed Financial Assessment which demonstrates how your after-tax cash-flow and your future financial goals are impacted by the mortgage. If your new house payment requires a short-term adjustment in saving for future goals, I prepare a step-by-step 5 Year Action Plan to help you catch-up and stay on track toward long-term financial independence.
Upon choosing the mortgage option that most suits you, your mortgage application and supporting documentation is submitted to Underwriting for formal review, approval and a mortgage commitment. This formal review process and the mortgage commitment constitutes a preapproval. If you work with a loan officer that doesn't proceed with the formal review and mortgage commitment, you have been prequalified (regardless of what the loan officer calls it) which has no credibility in the real estate market. A preapproval means you will get mortgage financing, a prequalification is the loan officer's opinion that you could get mortgage financing.
Step 5: Prepare a realistic "Must Have" and "Want" list for your new home
HUD has a well-rounded Home Buyers Wishlist in PDF format to print and make notes.
Step 6: Choose a qualified Realtor to represent YOUR interests.
If a Realtor's only job function was to drive you around and show you houses (i.e. act as a glorified chauffeur), the onset of the internet as a venue to list homes for sale would have put every one of them out of business. In reality, the high-value functions of a top-notch Realtor are their ability to negotiate and protect YOUR interests.
While you will meet many friendly Realtors holding Open Houses, it is enormously important to interview Realtors for their professional capabilities on your behalf in addition to their personal charisma. You will be depending on this person to negotiate one of the largest personal investments you will ever make.
Meet Wendy Cutrufelli, Certified Mortgage Planner, Realtor