|Spring into action to buy
a house this summer
Summer is the busiest time of year for home sales.
If you want to buy a house this summer, spring is a good time to
get the ball rolling.
No, it's not necessary to start looking at houses
three or four months before you plan to move. It's the financial
stuff that you tackle three to four months before moving day: finding
out your credit score and fixing any errors on your credit report.
Rudy Cavazos, spokesman for Money
Management International, which runs debt-counseling services
in Arizona, New Mexico, Illinois and Texas, says he advises people
to wait before finding a real estate agent and a lender. Instead,
he urges them to spend
$12.95 to get their credit scores and a copy of their credit
"You want to gain yourself some leverage,"
he says. "You gain that leverage by finding out what your credit
score is. Once you do that, you know where you stand, so if you
have a low FICO score, by starting now, early, you have time to
elevate it so that you have stronger bargaining power with your
score is a distillation of your credit history into a three-digit
number between about 300 and 850, the higher the better. What you
want at the absolute minimum is a credit score of 620 to qualify
for a conventional mortgage. A score above 720 is most desirable.
Credit scores are calculated using a secret mathematical
formula devised by Fair, Isaac & Co. -- hence the name "FICO."
Another common name is "Beacon score."
Errors appear regularly on credit reports, and they
can drop your score lower than you deserve. If that happens, you
might be offered loans on worse rates and terms than you otherwise
would qualify. Most mistakes on credit reports result from clerical
or computer errors by billers.
can be disputed with a letter to the credit bureau that describes
the mistake and requests an investigation. Expect the process to
take at least a month. Cavazos tells people to set aside 45 days
to repair credit-reporting errors.
If you're satisfied with your credit score and the
accuracy of your credit report, the next step takes place about
60 days before you plan to move. That's when you gather financial
documents that a lender will need: pay stubs, statements from banks,
brokerages and retirement accounts; income tax returns; records
of debts such as auto loans, mortgages, student loans and credit
Then it's time to find a broker or lender, who will
evaluate credit and income information to estimate how much you
can afford to borrow.
Of course, you've already estimated that yourself, right? No? Then
use this mortgage
If there are any obvious problems with your financial documents,
the broker or lender will tell you during this pre-qualification
If you haven't started looking at houses two months
before you plan to move, it's time to start. The most efficient
method is to find a trustworthy real estate agent who understands
what you're looking for. If you start searching for a house 60 days
before your target move-in date, you have a little over three weeks
to look and a half-week to haggle.
While you're searching, it's time to go beyond pre-qualification
and get pre-approved for a mortgage so that your offer for a house
is taken seriously. When you're pre-approved, it means that a lender
has agreed to lend up to a certain amount at specified terms and
"With a pre-approval, you're going to
have more leverage when you make an offer," says Steve O'Connor,
vice president for industry relations and policy development for
the Mortgage Bankers Association. "You can say, 'I've got a
loan approved already that's sufficient to purchase this home,'
and that makes you more attractive to a potential seller."
After you agree on price and terms for your house,
it usually takes a month or a little longer to accomplish everything
else: an inspection, an appraisal, final loan approval, title work
and closing. Not to mention packing up and moving.
By the time you've moved into your new home, you'll
look back fondly at that less-hectic time a mere three or four months
before, when you were reviewing your credit report and your days
were less stressful.