first time home buyer – owner loan

October 12, 2010

First Time Home Buyer’s Guide, Part 2 – 4 Things To Do Before You Go And Look For A Home

Filed under: Real Estate — Tags: , , , , , , , , , , , , , , — admin @ 12:04 am
Thomas Van asked:




Before Looking for a Home

Buying a house can be a new and exciting process; it can also be very confusing and stressful. Becoming educated about the house buying process and being prepared can reduce a lot of this stress and confusion. Anyone buying a home should take the following steps before they even step out to look at a house.

Check your Credit History

The moment you decide that you are ready to buy a house is the moment you need to get a credit report. When pulling your credit report, be sure to use a service that provides you with copies of your credit history and score from all three credit bureaus: Experian, Equifax, and TransUnion. Not all credit information is reported to each bureau, and lenders do not all check the same credit bureaus to determine your credit score so it is important that you get a copy from each bureau.

Obtaining a credit report early on in the home buying process is important because if there are discrepancies on your reports you must write to the bureaus and request that they are corrected. Depending upon how busy the bureaus are, this process can take up to months. Fixing errors on your credit history can result in a higher credit score and improvements in your credit score may qualify you for a lower interest rate. A loan with even a .25% lower interest rate can save you thousands of dollars over the course of your loan.

It is also important to note that pulling your own credit report will not lower your credit score in any way, this only happens when companies, like banks pull your history in attempt to approve you for items such as loans and credit cards.

Research Potential Loan Programs and Lenders

A house loan is often the largest and longest term of a loan that many individuals will ever receive in their lifetimes. Therefore, time should be taken to review potential lenders and loan programs that you may qualify for. For example, if you have a not so perfect credit history or need a low down payment you might want to see if you qualify for a FHA loan. If you are a veteran you may qualify for a Veteran’s Administration loan, which among other things allows individuals to put no money down without having to pay Private Mortgage Insurance. Some lenders offer special rebates, promotions, and programs for home buyers that ease the expenses involved with buying a home. Individual lenders vary in the interest rate they charge and the fees involved in the loan process. Even the nonrefundable application fee for some banks is upwards to $500, so it is important to research a bank and become satisfied with the loan programs they offer before you apply.

Get Prequalified/Preapproved

There is a big difference between getting prequalified and preapproved for a loan. When you get prequalified for a loan there are generally no fees involved and the bank gives you a rough estimate as to what they would give you for a loan based on the information you’ve provided them. It is not completely accurate and many sellers will not accept offers from buyers who are only prequalified. When you get preapproved for a loan you will have to provide more documentation and pay an application fee. When you are preapproved the bank generally states that you are eligible for the exact amount of your preapproved amount, granted that all the information you have provided to them is accurate.

If you’ve decided that you are ready to buy a house one of the very first steps you should take is to get prequalified for a loan. Before going out to look at houses that may potentially be out of your price range, get prequalified for a loan so you know what houses you should be looking at. If after getting prequalified you find that you qualify for a lot less than you anticipated for, ask the lender what you could do to qualify for a larger loan. You may discover that your debt to income ratio is too high or that the length of your credit history is too short. You may then decide to reduce some of your debt or if you are satisfied with the amount you may decide to get preapproved for a loan.

Determine How Much you Can and Want to Spend

Now that you have checked your credit history, and have gotten prequalified or preapproved for a loan you must determine how much you can really afford to spend. Do not blindly assume that you will be able to afford the payments your lender says you can. Keep in mind that lenders often push the limits of your loan to the outer boundaries, in order to get you the biggest loan possible and to make more money. If the mortgage payment you qualify for is a lot more than your current mortgage or rent payments look at the new value realistically. Can you REALLY afford that payment? Can you live comfortably with that much less money per month? If you are used to renting, keep in mind that you will now be responsible for repairs, yard work, insurance, and taxes. Do not tell yourself that you will give up certain activities or change your lifestyle in order to afford your new payment.

House buying should be an exciting and stress free process. If you educate yourself about lending processes and take the steps above you will be more prepared than many other home buyers.

Larry

March 13, 2009

Credit Card Advice for First Time Home Buyers

Filed under: Non Fiction — Tags: , , , , , , , , , , , , , , — admin @ 4:55 pm
Greg Roy asked:


In our modern world credit cards have become virtually a necessity. Consumers cannot book an airline flight without a credit card. Nor can they rent a vehicle without one. And while it is possible to make purchases online without a credit card, it is time-consuming and a hassle.

While the vast majority of the population has at least one credit card, it certainly is not the vast majority that use credit cards to their advantage. Like prescription medication, credit cards can be very beneficial. But also like prescription drugs, credit cards can bring great harm to the user when abused.

There are many predatory sharks swimming in the credit card oceans. It is critical for first time home buyers to apply sound, savvy financial management skills in their use of credit card accounts. Your very ability to qualify for a mortgage on your first home will depend upon it.

Here are some simple-to-understand but difficult-to-follow guidelines for the best use of credit cards. The word best in this instance means most financially prudent, or the most beneficial to your overall financial health in the short, medium and long term.

1. Don’t use credit cards to finance the purchase of consumer toys. While some credit cards provide an interest rate that is reasonable, most don’t. Interest can be very, very costly. The bottom line is that if you don’t have the money to purchase that latest electronic device that you want, you shouldn’t charge it on your credit card. Doing so can be very habit forming, and will burden you with excessive debt. The process of qualifying for a home mortgage involves meeting certain debt to income ratios. The less credit card debt that you have, the more easily you will be able to meet those ratios.

2. Pay off your entire credit card balance every month. This is so important and so beneficial, yet so few people do it. The ones that do are the ones that have mastered financial self-discipline and reap a lifetime of rewards. Have you ever seen car dealerships advertise zero-interest loans on certain vehicles. While the offers are valid, most people don’t have a credit score high enough to qualify for the teaser rates. And that’s what they are: teaser rates. You may not qualify for the zero-interest deal, but even if you don’t, the dealer got you into the showroom to find out. And that is the biggest hurdle in selling you a new car. However, if you do pay off your credit card balances every month, you will likely develop that very high credit score. Not only will you qualify for the best rates on your car financing, you’ll also qualify for the best rates on your home financing. It’s win/win in all cases.

3. Get your credit card portfolio established, then leave it be. There are very good reasons for this. Your credit score will be negatively impacted by constantly changing credit card accounts. Long-term stability is rewarded by the credit risk formulas. Who would you rather lend to, a person who has had the same credit card account for the past 10 years and has always made payments on time, or a person who opens and closes a different credit card account every month? Which person do you think is more likely to pay you back?

Additionally, the credit risk formulas penalize people for too many credit checks in their file. A person who is applying for a lot of credit is seen as desperate for credit. That is not helpful. When banks loan money, it is like loaning an umbrella on a sunny day. When it clouds up and begins to look like rain, banks will ask for their umbrella back. That’s just the way it is. Banks are most eager to make safe loans, and those loans would go to people who are flush with cash and don’t need a loan. The people who could be considered “dirt-poor” and penniless are the ones least likely to be able to obtain a loan. To develop a high credit score, you don’t want to be projecting the image you are desperate for credit. And you’ll need a high credit score to help you qualify for that mortgage on your first home.

The bottom line: use credit cards wisely. If you want to qualify for a mortgage to buy your first home, don’t use credit cards to buy things that you cannot afford to buy. Learn to make credit cards a tool for furthering you towards your financial goals. Fail to do that and you’ll likely end up a tool for the credit card companies to make outrageous profits for their upcoming quarterly report.



Javier

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