Mortgage

Am I Ready To Buy Property?

Ready to Buy Real Estate

So, you're tired of renting and would rather see that monthly payment go toward a home of your own rather than continue to line the pockets of your landlord? Before you sign those mortgage papers, let’s take a hard look at a few things:

  1. Are your finances in order?
  2. Do you have money saved for a down payment?
  3. Can you afford the monthly payment without changing your lifestyle?
  4. Are you committed to living in the same place for the duration?
  5. How are you at maintenance?

Fix your credit rating

Review your credit report and FICO score. Fix any problems, and dispute any mistakes well before you talk to a lender. Mortgage lenders are looking for you to display a record of financial stability, so don’t move money around or close up credit card accounts just yet.

Start saving now for a down payment

If you can put down 20% of the cost of a prospective home, then you will have more options than someone who cannot. 20% is usually the cutoff to not be charged mortgage insurance, but even 5-10% down can mean more choices in lenders. The more you can put down, the better off you will be; however don’t completely drain your emergency reserves or you could end up in trouble down the road.

Figure out your debt-to-income ratio

You’ll want to do this for your current (pre-mortgage) debt and income as well as for your future (post-mortgage) debt and income, as prospective lenders will be doing the same. You want about 36% of your monthly income going toward your debt and other regular obligations. Any more than 43% and you will probably have a hard time getting a loan. Chances are that if you could do anything to raise your income in a significant way, you would have done that already, so work to reduce your debt as much as possible.

You’re probably going to be there for a while

In general, you want to plan on keeping new property for at least five years. Most people should probably think even longer term (10-20 years). As long as you’re continually improving your property to some degree, it will continue to gain value, and the longer you can hold onto the investment, the better the payout will be. This means that you’d better like the neighborhood, because you’re making quite a commitment to it.

Every house is a fixer-upper

One of the most easily overlooked -- or at least overestimated -- aspects to buying your own home is your ability to fix things when they break. If you don’t know how to repair a leaky faucet then you’ll want to learn, because calling the landlord to fix it is no longer an option. That doesn’t mean you have to do it all. But after the fourth or fifth call to the plumber, you’ll probably want to start learning how to fix things yourself. And every house -- no matter how old -- is going to need a fix sooner or later.

Being a homeowner is both rewarding and affordable -- if you go into it with full awareness of the pros and cons. Asking yourself these questions and answering them shouldn’t scare you off from buying a home, but will hopefully lead you to making the right decision at the right time.   If you have questions, contact us today. You can also read all of our blog posts here.

Ups and Downs of Your Credit Report: Mortgage Loan Dos and Donts

money-256314_640When applying for a mortgage loan, it is in your best interest to be familiar with your credit report and hopefully possess a strong score. Your credit score correlates directly to loan opportunities, favorable rates, and the chance to establish revolving credit accounts. Mortgage Calculator suggests acquiring copies of your credit reports from all three major credit bureaus (Equifax, Experian and TransUnion) and reviewing them before applying for a mortgage. Look carefully for errors which occur in an estimated forty percent or more of all credit reports. Sheyna Steiner at Bankrate.com writes: investors demand higher yields from risky investments. This applies in the mortgage lending arenaLenders prefer borrowers with low balances, a long history of on-time payments and a mix of credit utilization -- for instance, a car loan and a couple of revolving accounts such as credit cards. The following a list of suggestions from Bankrate for keeping your credit score stable and ways to improve it:

Avoid late payments.

Paying bills on time is very important in maintaining a strong credit score. Blake Ellis for CNNMoney writes that payment history accounts for approximately 35% of yourscore so late payments on credit cards, student loans, mortgages or even doctors bills can all bring down your score if the company reports it to the credit bureaus.

Keep inquiries to a minimum.

Whenever you seek to open a new line of credit, an inquiry is made into your credit report. Inquiries typically stay on the report for two calendar years. Excessive inquiries in a short span of time are frowned upon. Ellis explains that: continually adding to your potential credit [is something] credit companies are going to look atas a risk. The concern is that you could become overextended at some point.

Keep card balances as low as possible.

Keeping credit card balances low, or even better, carrying no balance at all, shows you to be a lower risk for financial institutions. Mortgage Calculator advises: Carry low credit card balances, or pay them off, along with any other outstanding bills before applying for the mortgage. Ellis recommends keeping your balance low to ensure your credit utilization ratio (or percentage ofyour credit limit that you use) is in check. He writes that: with other measurements of your overall debt, this ratio accounts for about 30% of your credit score.

Don't close your unused accounts.

As surprising as it may seem, closing a line of unused credit can actually hurt your score. It can affect your credit ratio negatively, (giving you less potential credit to counteract the balances you could be carrying.) Mortgage Calculator counsels that a: positive credit score is a reflection of a good, positive standing with every creditor the consumer deals with, regardless of the account activity. The longer you maintain a positive credit history, the better the influence on your score. In essence, it is a good idea to keep old accountsopenrather than terminating the [unused] account these cards should be put away and the consumer should refrain from using them. Your credit score shouldnt be something you are afraid of and put off looking at. The more quickly you recognize problem areas, the more quickly they can be addressed. Remember these tips when preparing to apply for a mortgage loan and use the suggestions above to maintain your healthy credit score, or improve it if necessary.

 

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