Here are a few New Year's resolutions you should make if you hope to buy a home in 2011:
1. Pull a copy of your credit history and credit score. Mortgage lenders have become extremely conservative and restrictive in deciding which mortgages will get funded. Lenders will pull credit scores from each of the three credit reporting bureaus, Equifax, Experian and Trans-Union, and then use the middle score to determine your loan's interest rate and terms. You need to know that information ahead of time. Go to AnnualCreditReport.com and receive a free copy of your credit history and then pay for your credit score (about $9). You can also go to each credit reporting bureau and purchase a copy of your credit history and score, if you've already used up your freebies. Even if you don't plan on buying a home or refinancing a home loan, you might want to keep tabs on any issues that affect your credit history.
2. Practice good credit behavior. Lenders regard those borrowers with a credit score above 780 as their best borrowers. Unless your credit score is above that level, you should work on eliminating any errors, and practicing good credit behavior so that your credit score rises. The best thing you can do? Pay your bills on time and in full each month. The next best thing you can do is maintain four open and active lines of credit. Each credit reporting bureau offers good credit behavior tips for free on its website, or you can go to MyFico.com, which is the consumer-facing credit site owned by Fair Isaac, the Minneapolis-based company that invented the FICO score. (Full disclosure: This contributor writes about real estate for the Equifax Personal Finance Blog, where Equifax's credit experts blog about credit trends and information.)
3. Shop around for the best loan. Even though the federal government is backing more than 90 percent of all the loans through Fannie Mae, Freddie Mac, the Federal Housing Administration, the U.S. Department of Veterans Affairs and the U.S. Department of Agriculture, it pays to shop around. Make sure you talk to at least four or five lenders before you sign your application, including a "big box" lender, a small local lender, a credit union, a mortgage broker and an online lender. Use the information you glean from each lender to negotiate one against the other and get a great deal for yourself. Yes, you're allowed to negotiate with lenders and ask them to give you a better deal.
4. Create a great home buying team. Whether you're buying investment property or a home to live in, you'll want to create a team of real estate professionals who can help you find the right property, at the right price, on the best terms, without any headaches. Home buyers will want their team to include a great real estate agent, mortgage lender, real estate attorney, tax preparer (with experience in investment real estate if you plan on buying real estate as an investment), and real estate inspector to start. Residential real estate investors will want to add a 1031 exchange professional and commercial (if appropriate) inspector to the mix.
Ilyce R. Glink's latest book is "Buy, Close, Move In!" Distributed by Tribune Media Services