The $8,000 federal tax credit for first-time homebuyers is scheduled to expire on December 1.
However, in order to qualify, the transaction must be closed on or before November 30, essentially leaving first-time buyers with less than three months to complete the process.
While the urgency of trying to find and close on a home before the deadline may seem stressful, it doesn’t have to be.
For those first-time buyers who are in the early phase of the home buying process, here are seven steps for speeding up the process:
• Get started right now
The clock is ticking. You should plan to identify and purchase your home within the next 30 days, which would then leave you up to 45 days to obtain mortgage financing and complete all the necessary steps to closing, including appraisals, inspections and title work.
That means you should be under contract by early to mid-October in order to safely meet the closing deadline and qualify for this tax credit.
• Find a qualified agent
A team of experienced professionals is the key to making the home-buying process simple and seamless.
Start by interviewing and selecting an agent who understands what you’re looking for. A real estate agent will arrange showings and keep track of the properties visited.
He or she should also be able to help identify suitable lawyers, mortgage lenders, home inspectors and others who will play a role in the process.
Remember, an agent is an expert who will negotiate the best price and incentives on a home and oversees the sales process on your behalf.
It is critical that you get a timeline from your real estate agent so that you leave enough time for the sometimes lengthy closing process to occur.
• Know before you go
The first step in the home-buying process is to have an idea of the type of property you want to buy.
By separating the “must haves” from the “wants,” you can focus on what’s really important in a home.
• Get credit in order
A sound financial track record and solid credit score can help lock in a home loan and lower interest rates.
Lenders today are looking at prospective borrower’s credit reports more closely than ever, so it’s important to examine your credit report for mistakes and eradicate any “toxic” debt, such as overdue credit-card payments, before the home shopping begins.
Rectifying mistakes is easy to do, but it can be a time-consuming process.
Checking a credit score and addressing any errors will help expedite the approval process when it comes time to make an offer.
• Compile paperwork
At the same time you are working to correct or improve your credit report, you should also pull together the documents you will need to provide to the lender.
These documents include:
• Verification of employment form
• Two most recent pay check stubs
• Two most recent bank statements
• Copies of the last two W2 forms received from employer
• Copies of any asset statements including those for retirement accounts, stocks, bonds or mutual funds
• Copy of social security card
If there is a co-applicant on the loan, all of these forms will be required of that person as well.
• Get pre-approval
Once the paperwork is in order, it’s time to get pre-approved for a mortgage.
Pre-approval means that a lender has verified your credit and other credentials and is committed to making a loan.
This is different — and more valuable to sellers — than pre-qualification, which simply gives you an idea of the size of the mortgage you might afford without actually committing to a loan.
You are not obligated to get a loan from the lender that offers the pre-approval letter, but keep in mind that a pre-approval does involve giving permission for a hard credit inquiry. This could potentially result in a small ding on your credit report.
Getting this early green light, however, will demonstrate how serious you are about homeownership.
• Shop for the most favorable mortgage option
It’s imperative for you to educate yourself on the risks of the different types of mortgages and select the right one for you and your family.
Bob Bronswick is president and COO of Coldwell Banker Residential Brokerage in Sacramento/Tahoe.
