95% of first time home buyers and 86% of repeat buyers finance their home purchase so my comments have to do with financing.
1. Make sure your credit is in shape. You can obtain a free annual credit report from www.annualcreditreport.com. Actually there are three major credit reporting companies so you can get three reports a year by obtaining reports from different companies at different times. Pay off the small accounts and don’t use them. You can raise your score by reducing the number of accounts with balances. Of course you do want to make sure that you are using 3 different accounts that show current ratings.
2. Start to gather and manage the documents that you will need for your loan. You will need the last two years Federal Bank statements plus w-2’s, 2 most recent consecutive pay stubs, 2 most recent consecutive bank statements to prove the down payment.
3. Get pre-approved. There are probably thousands of loan rules these days and it is a good idea to sit down with a competent loan officer and discuss your loan application.
4. Don’t be surprised with unexpected real estate costs. Get a break down of the fees that will be associated with your purchase. Counties have traditions. In Santa Clara County it is tradition that the seller pays for the escrow, title, etc and one county away in San Mateo it is customary that the buyer pays these fees. Get a break down of the costs early so that there are no surprises.
5. Consider a Home Warranty. This is a policy that pays for repairs to appliances, etc during the first 12 months of ownership. I bought a home once and the Home Warranty was $400 but we had a major problem and the damage came to just over $5,000 — this is a good investment.
6. Talk to your accountant or tax-preparer and discuss if you should adjust your withholdings. If you have never owned a home before you do get a tax exemption and you may be able to claim more dependents during the year so that your actual pay check increases and you will still be even at the end of the year.
7. If you are in California you do want to consider a living Trust. This can save you thousands of dollars in the event of an untimely death.
8. Consider a life insurance policy to cover the mortgage. For most a term life policy is inexpensive – especially those who are still young.
This is the largest purchase for most of us — protect the asset with good financial planning and decisions.
