Monday, March 7, 2011

Are You Ready to Begin Planning for a New Home?

See Yourself as a Lender Will

When dealing with lenders, you have to be organized. You can save yourself a lot of wasted time and energy if you learn to look at yourself as a lender would.
Lenders will look at two basic numbers in deciding how much you can afford to borrow. Keep in mind: Once you know how much you can borrow you'll also know the price range of houses to look at.

What a lender inspects
This is where the paper pile begins! Your monthly housing costs, which include mortgage payment, taxes, and insurance; and, your total debt, which includes monthly housing costs - plus any long-term debts like a student loan, car loan, credit cards or other installment debt.
Understand basic borrower guidelines
They aren't too difficult... The lending guideline is that you should spend no more than 28% of your monthly gross income (before taxes) on housing expense. That can include business income, disability or retirement benefits, alimony, child support, etc.
Also, your total monthly debt payment, including housing and other long-term debts, should be no higher than 36% of your monthly gross income.
Check your credit rating
This is essential! A good credit report is an important part of your financial profile. Before you begin the process of applying for a mortgage loan be sure that you review your most recent credit report.
Be certain all of the information included in it is accurate.
Errors or misinformation in your credit history could have a negative impact on your chances for the best loan and interest rate.
The bottom line about lenders?
Lenders know that every borrower is different, and no lender expects you to be perfect. Their job is to lend money, so if they can make a home mortgage loan work for you, they will.
When NOT to buy
There are times when you should just walk away. If you've had some past financial problems, it's not the end of the road; you just need to fix them before you try to purchase a home. Even if you've gone through bankruptcy, all you need is time to handle your debts and repair your credit history. It may take a year or two to fine-tune your financial profile, but it's well worth it.
Perhaps your credit picture is not as black as the bankruptcy scenario but not picture perfect, either.
How much can you qualify for? With stable employment and income, you should be able to qualify for a mortgage loan worth almost twice your annual income. By taking time to improve your credit rating, you could raise that figure substantially.


No comments:

Post a Comment