Posted by Elizabeth Dennis on July 12, 2010 | No Comments
To get ready to buy a house one of the very first things you should do is check your credit rating and credit score. In most cases, you will need to take out a mortgage to pay for your new home. Your credit score is the most important factor in determining what interest rate you will pay for your mortgage.
Credit Bureaus
The information in your credit report is gathered by reporting agencies called credit bureaus who then offer it to potential creditors. The three main credit agencies are Equifax, TransUnion, and Experian. A creditor will make a decision about you with regards to your credit risk by looking at these companies’ reports. To better analyze your credit, you are assigned a credit score, a three-digit number that takes into account all of your credit history. The numbers range from 300-850; the higher the number indicating a better credit risk.
How is your Credit Score Determined?
Points are assigned based on items in your credit history. Your resulting score is compared to those of other consumers with similar profiles. With this information, mortgage lenders have a pretty good idea of how likely somebody is to repay their loan on time. There are different scoring methods out there but the most common is known as a FICO score. The name comes from an independent company who created it; Fair Isaac and Company. This is how the score is broken down:
- Payment history – 35%
- Amounts owed – 30%
- Length of credit history – 15%
- New credit – 10%
- Types of credit – 10%
The number and types of inquiries also play a role in determining your score. Public inquires, including bankruptcy filings are considered as are the number of inquiries made. If too many new credit inquiries exist, this may indicate to the lender that you are preparing to go into additional debt by taking out new loans. Fortunately, mortgage inquiries do not fall into this category. All inquiries from mortgage lenders within a 30-day period count as one inquiry.
Posted by Elizabeth Dennis on July 1, 2010 | No Comments
First Time Home Buyer
Regardless of your personality type, there are specific characteristics all first time home buyers should have. If only for the duration of the home buying process, you must consider yourself the following:
A Realist
Carefully and honestly distinguish between what you want in a home and what you need in a home. Be careful not to stretch your budget for features that you simply don’t need and won’t use much.
Analytical
Never hesitate to ask questions no matter how silly you may think they are. Remember, this is one of the biggest financial decisions you will make in your life time; you deserve to have every bit of information you need.
A Negotiator
Negotiating plays a significant role in the home buying process. To make sure you are getting the best possible deal on your home, it is a must. If you are working with a real estate professional, you will have somebody to do this “dirty work” for you but you are the ultimate decision maker in this regard and it pays to be strong and decisive.
Patient
Your home buying process may end up being quick and simple or it may be a bit more challenging and take quite a while. Be prepared for either case and remember every decision you make today should be made for the long haul. Your goal is to get the best home for you and your family; not to get in one quickly. Never settle for something you may regret later; your patience will undoubtedly pay off.
If you find it difficult to be the person with these traits, work with somebody who can be these things for you. Choose somebody in addition to your real estate professional: a friend, family member or colleague.
Posted by Elizabeth Dennis on June 29, 2010 | 1 Comment
If you are planning to buy a home, it is important to get your financial information and documents in order as soon as possible; even before you look at your first house. By doing so, you will significantly speed up the loan application and mortgage approval process.
Let’s take a look at what you will need.
- The very first thing you should do is request a copy of your credit report. Make sure there are no outstanding problems or errors that may prevent you from taking out a mortgage. It could take some time for discrepancies to be cleared up, so get this process going immediately. Along the same lines, be mindful of activity that is happening with your accounts during the home buying process. Avoid transferring large sums of money or taking out new debt.
- Now it is time to create a file of your financial records. Here is what you will need:
- W-2’s and tax returns for the last two years
- Pay stubs for the last two months
- If self employed, two years of tax returns plus a current profit and loss statement (i.e. income statement). If your income has been irregular you may need to produce account information from the last three years.
- Two months of checking account statements
- Two months of statements from other accounts (IRA, savings, money market, etc.)
- Documentation of other assets such as stocks, bonds, and CD’s
- Records proving that derogatory credit report items are paid off
- Social security numbers for those buying the home
- Two years of employment history; preferably steady work in the same industry
- Balances of other debt including car loans, store charge cards, credit cards, etc.
- Current landlord’s contact information, monthly rental payment amount, and previous landlords for the last two years
- If you currently own a home, have ready the address, mortgage lender, account number, payment amount, balance, and current market value of your home.
- The following are particular circumstances that may or may not apply to you:
- If you are separated or divorced, you will need your divorce decree or separation agreement. Include also child support payment amounts to be included in your income.
- If public assistance is part of your income, you will need to provide the amount you receive.
- If you have declared bankruptcy or have gone through a foreclosure or any other credit-related judgments against you in the last seven years, produce documentation of the proceedings.
The thought of gathering these items may seem tedious to you but is a critical step in the home buying process. Make copies of all documentation or better yet scan each piece and store it on your computer to be printed or forwarded electronically as needed. Stay organized by purchasing a portable accordion-style folder to store the originals and hard copies.
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