Buying a Home; Ready, Set, Move

Lots of people dream about buying a home at some time during their lives. Maybe they're newlyweds or just starting a family. Perhaps they just want to trade renting for a larger or nicer home that they can remodel and re-decorate any way they please.

Whatever the reason, prospective home buyers need to prepare themselves financially and emotionally for the process of finding, choosing and purchasing a home of their own.

Stick Around

The first question for buyers should be how long they plan to live in their next home. Buying a home for a short-term residence, say, less than five years, doesn't always make financial sense, even if homeownership feels right for other reasons. That's because buying a home, getting a mortgage, and then selling the home involve closing costs, which can be unwisely expensive for people who intend to move again soon.

Buyers should do the math, experiment with online mortgage and closing cost calculators, and consider their lifestyle and personal and career goals before they decide to purchase a home. Planning to stay at least five years can make buying a smart decision. Many homeowners get so settled, they remain in their house for decades.

Get Pre-approved, not Pre-qualified

Most people need a mortgage to buy their first home, and many people get a second, third or fourth mortgage later in life as they refinance to lower their housing cost or trade up to more desirable homes.

Mortgage pre-qualification is simple, and a good first step, because it helps buyers determine how much they probably qualify to spend for a property. However, pre-qualification is really basic --often done without pulling the buyer's credit or verifying assets and income.

Pre-approval, on the other hand, involves submitting an application package to a lender. Credit is checked and income is verified. Pre-approval, also called credit approval, means that as long as the chosen property meets the lender's requirements, the buyer can close.

Most real estate brokers, however willing and eager they may be to help, won't spend much time with buyers until they've demonstrated they can get a mortgage to buy a home. Pre-approval is well worth the effort, because buyers who are pre-qualified gain the respect of real estate agents and home sellers.

Hunt it Down

Once the home loan has been nailed down, it's time to find the home. This is where mortgage pre-approval really helps -- sellers who have a choice between two competitive offers often favor the more desirable pre-approved buyer. In addition, buyers don't waste everyone's time (including their own) because they know what they can afford.

Buyers who have to move on a specific date due to a job transfer, lease expiration or other non-negotiable deadline might face some difficulty when they find a home they want. Having financing lined up means they can close more quickly and are less likely to encounter glitches while in escrow.

A timeframe that's too short can be challenging, but a timeframe that's too long can mean the loan pre-approval will expire. It can be kept in force as long as the loan applicants periodically update their approval by giving their lender new pay stubs and account statements as they come in. They should also resist the temptation to apply for credit or make large purchases while in escrow -- doing so could void their loan approval.

The bottom line is that home buyers need to be ready to act and move very quickly when a property they like comes on the market, and simultaneously willing to wait patiently for that to happen.

With the right preparation and commitment, one day it will.

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