by Phillip B. Burum, DR Horton,
President, Building Industry Association (BIA) Baldy View Chapter
Many in our region have decided that this is the year that they will acquire their first home. This is likely the biggest and most important investment most Americans will ever make so, if you are among that proud and fortunate group, invest a bit of time to educate yourself about home ownership and homebuying.
Unlike the two hundred thousand dollars you could have spent earning a degree in “Canadian Studies” or “Puppet Arts” (yes, these are real majors at accredited universities), an investment into home ownership will actually pay dividends. Owning a home may even provide you the source capital you one day need to create an empire, as it did for Walt Disney. The founder of what many consider to be among the best run and most successful corporations in the world mortgaged his home in order to provide financing for the creation of Disney’s first feature length film Snow White and the Seven Dwarfs.
However, before you start shopping for the perfect place to call home, take a few hours or days to learn how to do it properly. Many of America’s builders, mortgage brokers, and others affiliated with the home industry provide workshops for new homeowners. These workshops typically provide a great overview of the important steps to be taken before signing on the dotted line. The first and most important of these steps that should be taken is to make an honest assessment of what an individual can afford.
Among the best resources a buyer has in making this determination is their potential lender. Meeting with a trusted lender and pre-qualifying for a mortgage will provide a stark look at an individual’s finances and purchasing power and help set the necessary parameters that a buyer will work within in the purchase of their home. Once a definitive budget is established, there are several steps that one should take before jumping into the market, such as cleaning up your credit score and saving for the down payment. Once those items are checked off, it is time to meet with your lender again.
The goal now, however, is to obtain a written pre-approval from your preferred lender. The pre-approval is a tentative commitment from a specific lender for mortgage funding. This process entails a much more thorough analysis of a buyer’s financial picture, including a detailed review of the buyer’s credit score, income sources, financial liabilities, and banking history.
During the pre-approval process, be sure to take the opportunity to thoroughly discuss various loan options. While internet mortgage lenders may offer some of the most competitive rates and fees available, when choosing your lender, do not discount the value of sitting across the desk from someone and walking through the details of all available options. Finding the right loan structure to meet the individual needs of the buyer is nearly as important as the home selection itself.
Please keep in mind that pre-approvals are not binding for the buyer, nor are they a guarantee of later approval of a specific loan from a lender. The final choice to borrow will be in the hands of the buyer, subject to final approval by the lender, based on the specific home being purchased and the credit worthiness of the buyer at the time of the purchase.
A pre-approval or pre-qualification should not be considered a suggestion. Pre-qualification and pre-approvals offer an honest assessment of what a first-time home buyer can afford and allows them to stay disciplined and make the most informed decision they can make on what may be the biggest and best investment they will make in their lifetime.
If I were as concise and eloquent as Benjamin Franklin, I could have summed up this entire article with a single sentence, “An investment in knowledge pays the best interest.” However, I am neither concise, nor eloquent. So, like my wife, you had to stay with me as I rambled on for five minutes waiting for me to get to the point, which is simple; educating yourself today will make buying your home tomorrow a more financially rewarding process.
The BIA Baldy View Chapter seeks to advance the opportunity to attain the American Dream of home ownership. For additional information on homebuying, home improvements or the benefits of homeownership, go to www.biabuild.com on the web.