In the nearly 20 years that we’ve been writing this column, we’ve offered New Year’s Resolutions for home buyer and home sellers, plus New Year’s Financial Resolutions that everyone can use to start their year off right.
This is the first year since 2007 that we’re starting with a brighter outlook for real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements.. Home values are rising in more metropolitan areas, and foreclosures are down. Best of all, mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds. rates remain at an all-time low and Ben Bernanke, chairman of the Federal ReserveThe Reserve is the amount of money set aside by a condo, co-op, or homeowners' association for future capital improvements., has indicated interest rates will be low until the unemployment rate reaches 6.5 percent, probably through early 2015.
If you’re hoping to buy a home to live in or to invest in during 2013, here are a few New Year’s resolutions you might want to make:
- Pull a copy of your credit history and credit score. Mortgage lenders remain extremely conservative and restrictive with lending requirements. Mortgage lenders will pull credit scores from each of the three credit reporting bureaus, Equifax, Experian, and Trans-Union, and then use the middle score to determine your loans interest rate and terms. You need to know that information ahead of time. Go to AnnualCreditReport.com and receive a free copy of your credit history and then pay for your credit score (about $9). You can also go to each credit reporting bureau or MyFico.com and purchase a copy of your credit history and score, if you’ve already used up your freebies. Just be aware that mortgage lenders use a special FICO score to evaluate you. Your credit score from AnnualCreditReport.com will be close, but it may not match up perfectly. Still, it’s a good indication of what your lenderA Lender is a person, company, corporation, or entity that lends money for the purchase of real estate. can expect, and it’s helpful to have when shopping around with lenders before you actually apply for the loanA Loan is an amount of money that is lent to a borrower, who agrees to repay it plus interest..
- Practice good credit behavior. Lenders regard those borrowers with a credit score above 760 or 780 as their best borrowers. If your credit score is below that level, you should work on eliminating any errors on your credit history, then practicing good credit behavior so that your credit score rises. The best thing you can do? Pay your bills on time and in full each month. The next-best thing you can do is maintain at least four open and active lines of credit. Each credit reporting bureau offers good credit behavior tips for free on their website or, you can go to MyFico.com. (Full disclosure: I contribute real estate posts to the Equifax Finance Blog, where Equifax’s credit experts blog about credit trends and information.)
- Shop around for the best loan. Even though the Federal government is backing more than 90 percent of all the loans through Fannie Mae, Freddie Mac, FHA, VA, and USDA, it pays to shop around. Lenders have different borrower profiles and depending on the makeup of their own loan portfolio, they’re looking for different types of business. That’s why you’ll want to talk to at least four or five lenders before you sign your applicationYour Application is a series of documents you must fill out when you apply for a home loan, or insurance policies., including a “big box” lender, a small local lender, a credit union, a mortgage brokerA Mortgage Broker is a company or individual that brings together lenders and borrowers and processes mortgage applications. and an online lender. Use the information you glean from each lender to negotiate one against the other and get a great deal for yourself. And yes, you’re allowed to negotiate with lenders and ask them to give you a better deal. (We’d be disappointed if you didn’t!)
- Create a great home buying team. Whether you’re buying investment property or a home to live in, you’ll want to create a team of real estate professionals who can help you find the right property, at the right price, on the terms, without any headaches. Home buyers will want their team to include a great real estate agentAn Agent is an individual who acts on behalf of a consumer. A real estate agent represents a buyer or a seller in the purchase or sale of a home. Licensed by the state, a real estate agent must work for a broker or a brokerage firm. An insurance agent helps a consumer purchase an insurance policy. Insurance agents are also licensed by the state.A Real Estate Agent is an individual licensed by the state, who acts on behalf of the seller or buyer. For his or her services, the agent receives a commission, which is usually expressed as a percentage of the sales price of a home and is split with his or her real estate firm. A real estate agent must either be a real estate broker or work for one., mortgage lender, real estate attorneyA Real Estate Attorney is an attorney who specializes in the purchase and sale of real estate., tax preparer (with experience in investment real estate if you plan on buying real estate as an investment), and real estate inspector to start. Residential real estate investors will want to add a 1031 exchangeA 1031 Exchange is a means used by investors to defer the payment of federal income taxes. The owner of an investment property will sell that property, deposit the funds with an intermediary company, later buy a replacement like kind property and defer the payment of all federal income taxes. There are many rules that apply to these type of exchanges. professional and commercial (if appropriate) inspector to the mix.
Having the right team in place will go a long way toward making your dream of home ownershipOwnership is the absolute right to use, enjoy, and dispose of property. You own it! in 2013 come true.