The best way to pay for a home is with cash! Not only does it set you up for building wealth, it streamlines the real estate process. If you did get a mortgage, you’ll have a final step before you can close on your home: getting final approval. Your lender will dig through the details of your finances to finalize your mortgage. Whatever you do, don’t open a credit card, take on more debt, or change jobs once you’re under contract. That’s a stupid idea anyway! Plus any changes in your financial situation can jeopardize your loan process.

Once you've got your savings growing, your down payment set, and you are pre-qualified and pre-approved, start the search for your home. Begin by using sites like Zillow.com or Realtor.com to zero in on the home you want and the community you want to live in. Factor in key lifestyle needs -- like good schools, decent commute to your job, manageable property taxes, and ultimately, a home that has a good chance of appreciating in value if you ever want to sell it.
How to avoid this mistake: Talk to a mortgage professional about getting pre-qualified or even pre-approved for a home loan before you start to seriously shop for a place. The pre-qualification or pre-approval process involves a review of your income and expenses, and it can make your bid more competitive because you’ll be able to show sellers that you can back up your offer. (See what a pre-approval is and why it matters.)
Fixed rate mortgages are just what they say they are -- mortgage loans that allow borrowers to "lock in" a fixed interest rate over the complete loan period (typically 15-to-30 years.) There are upsides and downsides to fixed-rate mortgages, depending on the direction of interest rates. If rates spiral downward, the loan borrower is stuck paying the higher interest rate stated on the mortgage loan contract. On the other hand, if interest rates climb, the borrower's fixed interest rate insulates them from paying the added costs linked to mortgage loans with soaring interest rates after the mortgage is signed.

You'll want to know in advance that you likely qualify for a home loan, and that's where a credit check can prove invaluable when you buy a house. Your credit check will track your financial health using data from the three primary credit reporting agencies -- Equifax, TransUnion and Experian. Your credit score from each agency can range anywhere from 350 to 800. The higher the credit score, the more likely you'll be granted a home loan, and the more likely you'll pay a lower interest rate when securing a home mortgage (that's because a high credit score will be viewed by a mortgage lender as a lower-risk loan proposition). In your run-up to your credit check, avoid taking out any loans or credit -- that will raise your credit risk level in the eyes of lenders -- and make sure you pay down any debt owed, and ensure you've got a good track record of paying your bills on time.


You’re almost home. Once your mortgage is approved and at least three business days before you close, you receive a closing disclosure. It lists the fees you must pay, which typically total 2 to 5 percent of the home price. Read this closely and tell your lender if anything seems off. Know what to bring to your closing—such as your ID and any payments that are due. If you have a cosigner, that person needs to be there. Most of the time is taken up carefully signing forms. Once the loan closes—which may take a couple days—the funds go to the seller, you get handed the keys and the home is yours!

Great article, very helpful. I love how you mention getting both of the partners’ credit scores in shape and saving money for a down payment. You have to start preparing for a new home long before you actually buy one. My husband and I have been working towards it for a few years, and we are finally ready to start looking! I am so excited and nervous at the same time!
Sounds hard to believe, but it’s not rare for new homeowners to be late with their first monthly payment, or to miss it altogether, says Neil Garfinkel, a real estate attorney with Abrams Garfinkel Margolis Bergson in New York City. “Maybe you didn’t fully understand the process. You thought it was being auto-deducted but it’s not being auto-deducted. You didn’t get the bill in the mail. Whatever. Those first couple of payments, from a credit perspective, are really, really important,” he says.
A mortgage is defined as a secured loan that uses your home as collateral. The key here is to identify what monthly mortgage payment you can afford without losing any sleep at night. Expect that figure to be around 15%-to-30% of your monthly income (depending on your local tax rates and the amount of your homeowner insurance). This step ties into step one -- the more money you save, the less you'll have to pay on your mortgage loan interest (see next step below.)

While getting pre-approved for a mortgage is not necessary to close a deal, it can help you close the deal quicker. In turn, being pre-approved can give you more bargaining power when negotiating as it signals to the seller that you have strong financial backing. Getting pre-approved for mortgage also allows you to know the limit up to which you can go for purchasing a property. It helps in saving time and effort while searching for the properties that fit into your budget.


Once the property enters escrow, the purchase should be contingent upon it passing a home inspection. Once your offer is accepted, arrange to have an inspector visit the property and identify anything that needs to be fixed. Both you and the seller should receive a copy of the inspection report, after which you can renegotiate with the seller in case anything needs to be fixed. In worst cases, the contingency also protects you in the event that you would like to withdraw your offer.


Throughout the process, your mortgage lender will likely request various documents from you, such as updated pay stubs, current tax records, and other items that may have changed since pre-approval, as well as information about the home insurance policy you plan to purchase. Try to respond as quickly and accurately as you can, providing the needed information as soon as possible. Your promptness will help move your loan through the process faster and help ensure you can close on time.

2) Figure out how much home you can afford. Remember, just because the mortgage company will loan you the money doesn't mean you should take it. There are rules of thumb like not spending more than 28% of your income on mortgage payments, but every person's situation is different. Two people may have the same income, but one may need to save more for retirement or choose to make large private school tuition payments for their kids. Take a look at your current saving and spending needs to see how much you can realistically afford to pay each month and don't forget to leave some room for the potential "hidden expenses" of home ownership like utility bills, HOA fees if applicable, repairs and maintenance.


How to avoid this mistake: Talk to a mortgage professional about getting pre-qualified or even pre-approved for a home loan before you start to seriously shop for a place. The pre-qualification or pre-approval process involves a review of your income and expenses, and it can make your bid more competitive because you’ll be able to show sellers that you can back up your offer. (See what a pre-approval is and why it matters.)

As a first-time home buyer, you probably don’t have a ton of money saved up for the down payment and closing costs. But don’t make the error of assuming that you have to delay homeownership while saving for a huge down payment. There are plenty of low-down-payment loan programs out there, including state programs that offer down payment assistance and competitive mortgage rates for first-time home buyers.
As you save money for your down payment, avoid the temptation to invest in the volatile stock market with money you hope to use in the next year or two. While you might be tempted to try to earn a greater return on your money than an online saving account paying one percent, the greatest risk is not having your money available when you’re ready to buy a house.

Before contacting a lender, it’s smart to check your credit report. By law, you can get a free report once a year through Annualcreditreport.com. The report pulls data from the three major credit-reporting agencies: Equifax, TransUnion and Experian. Having the information in hand before you talk with a lender lets you dispute any errors in the reporting. Based on your credit report, Fair Isaac & Co. (FICO) assigns you a credit score ranging from 350 to 850. The higher your credit score, the lower the interest rate on your mortgage. Scores are based on:

PMI stands for private mortgage insurance. As part of qualifying for a conventional loan, you will have to get PMI if you put down less than 20%. Once your equity in your home reaches 20%, you can get the PMI removed (lowering your monthly mortgage payment). However, with an FHA loan, the insurance stays on the loan for the life of the loan, regardless of the equity in the loan. The private insurance on an FHA loan is called mortgage insurance premium (MIP). There is no way to avoid MIP on an FHA loan.

Arrange for a home inspector to look over the property. The real estate agent can help locate a reputable inspector for the task. A qualified inspector will check the foundation of the home, plumbing, electrical systems, the roof, walls, and visible insulation. An inspector will also look for signs of mold, asbestos, and pests. A home inspection is generally one of the steps to buy a house that is being resold.
Pre-approval is yet another option that is available. For pre-approval a credit check is run and the amount of available down payment is taken into consideration. The lender also looks at any owed debt and even if the person is a first time home buyer. This results in an estimated pre-approved amount that is typically favored over pre-qualification.

The fastest-growing metro area in Arkansas takes the No. 5 spot. Residents spend 25.47 percent of the blended annual household income on a mortgage or rent and utilities. Also coming in the overall Best Places to Live list at No. 5, Fayetteville is seeing significant population growth, plus a short commute time and low crime rate contribute to its appeal among the 100 largest metro areas in the U.S.

If you want the smallest mortgage payment possible, opt for a 30-year fixed mortgage. But if you can afford larger monthly payments, you can get a lower interest rate with a 20-year or 15-year fixed loan. Use our calculator to determine whether a 15-year or 30-year fixed mortgage is a better fit for you. Or you may prefer an adjustable-rate mortgage, which is riskier but guarantees a low interest rate for the first few years of your mortgage.
When you’ve selected a Realtor, start searching in earnest for your new home. Your real estate agent will find properties that he or she thinks you may like, but you can also search on your own. Check out internet listings, drive around and look for yard signs, and ask around to learn about houses that may be available in the neighborhoods you want. In a seller’s market, where available properties may be limited, try to exhaust all your options—not just Trulia, Zillow, and whatever your Realtor sends your way.
The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

Williams got his start working in entertainment reporting in 1993, as an associate editor at "BOP," a teen entertainment magazine, and freelancing for publications, including Entertainment Weekly. He later moved to Ohio and worked for several years as a part-time features reporter at The Cincinnati Post and continued freelancing. His articles have been featured in outlets such as Life magazine, Ladies’ Home Journal, Cincinnati Magazine and Ohio Magazine.
| |RateShield Approval locks your initial interest rate for up to 90 days on 30-year conventional, FHA and VA fixed-rate purchase loan products. Your exact interest rate will depend on the date you lock your rate. Once you submit your signed purchase agreement, we’ll compare your rate to our published rates for that date and re-lock your interest rate at the lower of the two rates for an additional 40 to 60 days. Quicken Loans reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Quicken Loans. This is not a commitment to lend. Additional conditions or exclusions may apply.

Some other things home buyers can do to turbocharge their scores is to bring any past-due credit card balances current and stop using credit cards altogether — but don’t close the accounts once you pay off the balance. It looks good for you to have established and available credit, as long as you don’t use it. That means keep that Old Navy card and Visa gas card open, even if you no longer use them. The longer you’ve had the account, the more it enhances your score.
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