First Time Homebuyer: Steps to Success (Step 1)

It may not seem like it, but there is a process to buying a home and taking certain steps in the proper order just about guarantees success. Taken out of order – putting the cart before the horse – the steps are inefficient and counterproductive, and the process becomes chaotic.
Remember when you were learning algebra? If you tried to take a shortcut, you would get the wrong answer. The steps are there for a reason, and they simply must be followed, in order, if you’re to be successful.
Over the next three posts, we’ll take a look at the three steps you must take before looking at even one home for sale.
Today we look at the first step: Figuring out where you stand financially. If you’ll need a mortgage loan, this is the most critical step in the process and it can make or break your house budget.
Step 1: Check Your Credit
When faced with a loan application, the first task on a lender’s to-do list is to order the applicant’s credit reports and determine his or her credit score. This score is produced by Fair Isaac Corporation – and is known as your FICO^® score. This score not only reflects your credit risk but will be used in the determination of the interest rate you’ll be offered.
Calculated from the data in your credit reports, FICO^® credit scores range from 300 to 850 and FICO^® uses five categories in the calculation:

• Payment History: FICO bases 35 percent of its score on your payment history.
• Account Balances: 30 percent of your score is based on your current account balances, listed in your credit reports.
• Length of Credit History: This category is used to determine 15 percent of your credit score.
• New Credit – 10 percent of your credit score depends on new credit obtained.
• Types of Credit – the types of credit you use accounts for the final 10 percent of your FICO^® score.

This formula is not set in stone. People who have short credit histories – young people for instance – are weighted differently than those with long credit histories.
You are entitled to a free copy of your credit report from each of the three major credit reporting agencies once a year. Make sure you order the reports at AnnualCreditReport.com, the only site authorized by the federal government.
Next time, when we take a look at Step 2 in the home-buying process, you’ll learn how to clean up your credit and raise your score.


Lawrence Childress
REALTOR, HUD, REO, SFR, LTO, NACA Certified
Home Smart Cherry Creek
720-270-8750

Email: LawrenceSellsRealEstate@gmail.com
Website: www.Lechomes.com
Blog: www.denversrealestatescene.com

  

2 Things to Consider Before Buying a Townhome

If you’re like many home shoppers, you understand that there are differences between condos and townhomes but you don’t quite understand what those differences are. This is because there are also similarities, most notably that townhomes are frequently governed by a homeowner association and condos almost always are.
I don’t know about you, but when I think about condos, I picture a large structure with lots of units. This is typical of many of our condo communities. The problem with describing the home in this manner, however, is that the word “condominium” is a form of ownership, not a type of structure.
There are three main types of homeownership:

• Fee Simple: Ownership of the land and the home
• Condominium: Sole ownership of one unit in the community and joint ownership of common areas.
• Cooperative: Ownership of shares in a corporate-owned building with the right to live there but the person doesn’t actually own the unit.

The condo owner owns only what is between the walls of his or her unit and has an ownership share in the common areas. The word townhome, on the other hand, is a structure that usually has at least two stories, it is attached to at least one other home but each home has its own front door to the street, not a hallway as many condos do.
To make it even more confusing, townhomes can be owned as condominiums or fee simple ― meaning the homeowner not only owns the home, but the land on which it sits as well.
Let’s take a look at two of the most significant questions you should ask when you’re considering buying a townhome.

1. Homeowner Association
Buying a home in a managed community means that you’ll be required to pay monthly HOA dues and other fees. These can be quite significant, so take them into account when determining how much you can afford to spend on housing every month.
Also, ask questions about anything in the HOA documents that you don’t understand.

2. Getting Financed
If you’ll be taking ownership of a townhome as a condominium, rather than fee-simple, the lending process is a bit different.
The lender may look at the owner-occupancy rate in the community. If the tenant-occupied rate is more than 30 percent, you may have to search long and hard for a lender who will take it on.
The lender will also peruse the documents to determine the number of homeowners that are behind in their dues payments. If that number exceeds 15 percent of all homeowners in the community, you’ll have trouble finding a loan.

Townhome living is ideal for those that want the benefit of homeownership at a cheaper price and without some of the maintenance chores that come with a detached home. Do a bit of homework, however, before agreeing to purchase.



Lawrence Childress
REALTOR, HUD, REO, SFR, LTO, NACA Certified
Home Smart Cherry Creek
720-270-8750

Email: LawrenceSellsRealEstate@gmail.com
Website: www.Lechomes.com
Blog: www.denversrealestatescene.com