For most people in California and throughout the country, the process of buying a home starts months before the house search does. Ideally, a prospective buyer will get his or her finances in order and ready to be scrutinized by mortgage lenders. In addition to the mortgage payment, a buyer will need money for a down payment and other up-front costs due at closing. Individuals who are looking to buy a home may also need to improve their credit score.
Lenders will generally require a minimum credit score of 620, but FHA loans may only require a minimum score of 580. Furthermore, someone looking for a mortgage will need to have a debt-to-income ratio of less than 50 percent and a steady source of income. Once a person feels confident in his or her ability to meet lender requirements, it is time to determine what he or she can afford.
This can be done by talking directly to lenders or using online home affordability calculators. Generally speaking, a person will need to put down as much as 20 percent of the purchase price at closing. However, it may be possible to get a loan with a down payment of as little as 3.5 percent. Putting 20 percent down may allow a person to avoid paying mortgage insurance.
Working with an attorney may make it easier to prepare for a real estate closing. It may also make it possible to have issues resolved prior to the transaction becoming official. Legal counsel may also review the terms of a home loan with a buyer so that this person has a better understanding of his or her rights and responsibilities. A real estate agent may also be able to help with any issues that arise during the process of buying a residential property.