By Ilyce Glink and Samuel J. Tamkin, Tribune Media Services
In the nearly 20 years that we’ve been writing this column, we’ve offered New Year’s resolutions for home buyers and 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 estate. Home values are rising in many metropolitan areas and foreclosures are down. Best of all, mortgage interest rates remain at an all-time low and Ben Bernanke, chairman of the Federal Reserve, 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:
1. 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 loan’s 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). If you’ve already used up your freebies, go to each credit reporting bureau or MyFico.com and purchase a copy of your credit history and score. 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 lender can expect, and it’s helpful to have when shopping around for lenders before you actually apply for the loan
2. 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 and then practice 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 on their website, or you can go to MyFico.com. (Full disclosure: I contribute real estate posts to the Equifax Finance Blog, where Equifax’ credit experts blog about credit trends and information.)
3. 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 application, including a “big box” lender, a small local lender, a credit union, a mortgage broker 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!)
4. 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 agent, mortgage lender, real estate attorney, 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 exchange 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 homeownership in 2013 come true.
(Ilyce R. Glink’s latest book is “Buy, Close, Move In!” Samuel J. Tamkin is a Chicago-based real estate attorney. If you have questions, you can call Ilyce’s radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. Contact Ilyce and Sam through her website, www.thinkglink.com.)
(C) 2012 ILYCE R. GLINK AND SAM TAMKIN. DISTRIBUTED BY TRIBUNE MEDIA SERVICES, INC.