My Financial Ally
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Key Steps to follow when purchasing a home

Summary of Steps:

  • Step 1:  Get a free credit report and ensure there are no mistakes.
  • Step 2:  Get your credit score.
  • Step 3:  Find a very good real estate agent.
  • Step 4:  Get pre-qualified for a loan.
  • Step 5:  Decide on the maximum amount you want to spend.
  • Step 6:  Pick a settlement company.
  • Step 7:  Write a contract.
  • Step 8:  Decide on a mortgage type & mortgage lender.
  • Step 9:  Perform a pre-settlement walk through.
  • Step 10:  Go to Settlement



Step 1:  Get a free credit report and ensure there are no mistakes.
Everyone is allowed to get a free credit report from each of the 3 main credit bureaus every 12 months. The official site is http://www.annualcreditreport.com/

Step 2:  Get your credit score.
Pay something extra and get your credit score so that you understand how your credit compares with everyone else. Is it average, exceptional, etc.
There are several sites where you can get your credit score. Our recommendation is to go to the equifax website.
Below is a generalized average rating of FICO scores. Most lenders look for acceptable or better scores; each lender makes a decision about what level of risk they are willing to accept.

  • 720-850: Outstanding credit ("AA")
  • 700-719: Very Good credit ("A")
  • 675-699: Good credit ("B")
  • 620-674: Acceptable credit ("C")
  • 560-619: Poor credit ("D")
  • 500-560: Very poor credit ("E")
  • Below 500: No credit, credit-based applications denied outright ("F")

Step 3:  Finding a good Real Estate agent is a key part of purchasing a home.
Good real estate agents often work evenings and weekends and usually are on call to suit any needs you might have. The difference between a great agent and an average one is huge. Click here to learn more about how to find a very good real estate agent and why it is so important

Step 4:  Get pre-qualified for a loan.
It is important to get pre-qualified for a loan. That means you go to a lender and apply for a mortgage before you actually start looking for a home. Then you will know exactly how much you can afford to spend, and it will speed the process once you do find the home of your dreams since it will ensure that you can get a sufficient loan to buy the home. You are under no obligation to get your loan from the company that pre-qualified you therefore you should not waste too much time figuring out whom you should use to get pre-qualified with. You can call any mortgage broker that your agent recommends and get pre-qualified that way, or if you prefer an online method, you can visit the e-loan website

Step 5:  Decide on the maximum amount you want to spend.
This is an obvious step, but one that is very important that you perform prior to looking for homes to buy so that you do not end up getting in more debt than you can easily afford. Buying a more expensive home than you should is a mistake that a lot of people do. The result is that their entire home can get in jeopardy if something negative changes in their job situation.

Step 6:  Pick a settlement company.
A settlement company attends to the important final stage in the sale or purchase of a property, which involves the transfer of the title from the seller to the buyer. The balance of the purchase price is paid and any other outstanding matters are attended to.

It is a mistake not to identify the settlement company that you want to use prior to submitting a contract. Most people do not perform this step before submitting a contract for a home and thus are at the mercy of their agent. In most cases, the real estate agent gets a kickback from the settlement company, so it is a smart idea for you to negotiate a better deal for yourself.

Settlement companies charge you their own set of fees (e.g. closing fee, document preparation fee, etc) and are usually the ones that sell you title insurance. For more details on title insurance click here.

When shopping around be sure to get a quote that combines all the fees together with how much you will be charged for the Title Insurance. This will allow you to judge more accurately how much your total cost with that company will be.

Step 7:  Write a contract
After following all of the above steps, you are ready to find the home you'd like to submit a contract for. It is the buyers right to select the settlement company so just remember to include in the contact the company that you have chosen ? per the previous step.

Step 8:  Decide on a mortgage type
Once you have a contract ratified, decide on what mortgage type you want and from which lender/broker. If you would like further details with this step, see our article on the topic:  Getting the Right Mortgage

Step 9:  Perform a pre-settlement walk through.
The pre-settlement walkthrough is highly important to perform before going to settlement. It allows you an opportunity to inspect all work that has been done on the house, as well as make a notice of any damages that may have been previously overlooked. For a helpful checklist to guide you, click here

Step 10:  Go to Settlement.
The Home is yours. All that remains is to go to settlement, sign the closing papers, and possibly have a lawyer skim over any last minute papers.

Congratulations, you can now continue on as a proud owner of a new home.

--Your Financial Ally