10 steps to home ownership - Money Talks

IT'S the American dream. But owning your own home doesn't have to be a dream anymore.

Now, with an array of programs available for first-time buyers and a wealth of information online, becoming a homeowner is no longer reserved for the wealthy, but for those who are armed with the right information. So, if you're ready to make the long-awaited dream a reality, follow these 10 easy steps to your home sweet home:

1 PULL YOUR CREDIT REPORT AND CORRECT ANY ERRORS. By law, under the Fair Credit Report Act, you have the right, free of charge, to dispute any entry on your credit report. Because your credit score and corresponding credit grade will play a significant role in your options when it comes to shopping for interest rates and mortgage programs, it is essential that you review your report. You can request a copy of your credit from TransUnion, Equifax or Experian by mail or online, or you may order a copy of your "merged" report, which lists data from all three credit bureaus, at creditreport.com.

2 TAKE A FIRST-TIME HOME BUYERS CLASS. Accessing information on home ownership is easier than ever before. A good place to start is FannieMae.com, which offers useful tips on applying, qualifying, and purchasing for first-timers and re-financers. Your local bank may offer seminars or classes where agents, brokers, attorneys and loan officers are onsite to answer any questions. Learn about loan types, sizes, interest rates, low-income programs and down payment assistance.

3 DECIDE HOW MUCH YOU CAN AFFORD. According to Jesse Brown, author of Investing in the Dream, the first step in determining how much house you can afford is to look at how much you have as a down payment. "Generally, a bank or mortgage lender will not give you a loan if the monthly costs of your proposed mortgage amount [payment plus property tax and homeowners insurance] and other monthly debt payments add up to more than 28 percent of your gross monthly income," he says. The lower your debt-income ratio, the more house you can afford.

4 DECIDE WHERE YOU'D LIKE TO LIVE. The location of your home, including school districts, business districts, economic growth areas and proximity to state and local highways will contribute to your home's property value. A good rule of thumb when evaluating the value of a prospective home is to consider what would make your future home attractive to purchasers when you are ready to sell.

5 FIND A REAL ESTATE AGENT. When you are deciding on a new location or neighborhood to buy a new home, a Realtor can help you determine the pros and cons based on your family's needs and preferences. "This is the biggest purchase of your lifetime, and you've got to make sure that you're working with someone you can trust," says Javier Perez, loan officer for Washington Mutual in Chicago. "This is a client-driven market, so I advise prospective homeowners to interview several Realtors, loan officers and attorneys to determine the best fit."

6 GET PRE-QUALIFIED. The process of pre-qualification is an essential step. "Realtors require a commitment letter that lets them know you've been pre-approved for a specified loan amount based on your current credit and income," says Craig Hodges, mortgage loan officer and real estate broker at Vision Mortgage in Belvidere, Ill. "If your credit is good, the pre-qualification may last for up to 120 days, but if it's lower than average, it may have to be renewed every 30 days."

7 INSPECT YOUR HOME AND NEIGHBORHOOD. During your first walk-through of a home, be sure to check out the condition of the roof, the plumbing, walls, floors, carpet, furnace and any interior or exterior damage. Drive through the area during different times of the day to observe traffic patterns and neighborhood routines. In addition to speaking with the sellers, talk to others who live in the neighborhood about their experiences in that location.

8 MAKE AN OFFER. When you have found the home of your dreams, you are ready to make an offer through a purchase agreement that includes your offer, prospective closing date, down payment, any seller assistance monies and other applicable terms. If you include an earnest money deposit in your purchase contract, be sure that the offer allows you to get your money back if a professional inspection reveals problems with the house or if you are unable to get approved for a mortgage.

9 APPLY FOR A MORTGAGE. Your broker can help select the mortgage that's right for you, including interest rates (fixed or adjustable), length of loan (15, 20 or 30 years), size of loan, type of loan (conventional, FHA, VA) and other fees. Once you've applied, your loan will be submitted for processing, underwriting, all inspections ordered and a closing date set.

10 CLOSING. At the end of the process, the buyer and seller sign all legal documentation and effectively transfer ownership. The buyer pays remaining costs and down payment while the lawyers, Realtor, closer, agent and loan officers finalize the transaction. Once all paperwork is completed, you will receive the keys.