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Financing Roadmap

 

Preparation


Where do you begin to secure finances for purchasing a new home, refinancing an existing home, purchasing your dream ranch, or obtaining a real estate equity line of credit? Obtaining a real estate loan can be confusing. You can simplify the process and avoid a lot of potential headaches by getting off to a good start. Here are a few things you can do:

1.1 Build your 'Buyers File'. Organizing and compiling all your pertinent financial documents into a 'buyer file' is an absolute must for any potential borrower. Your buyer file is a resume or profile that will give lenders an idea of what kind of debtor you might be. The typical buyer file should contain:

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Financial statements

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Bank accounts

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Investment records

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Credit card information

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Auto loans

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Other indebtedness

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Recent pay stubs

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Tax returns for two years

1.2 Consider your Credit Rating. Another means by which lenders gauge your trustworthiness as a borrower is through your credit rating. Credit ratings tracks your credit history, which includes such crucial information as the number of your open loans and the punctuality of your payments.

Treat your credit like gold. Credit ratings are important because they determine whether or not you will be approved for a loan and what your interest rate will be. I suggest checking your credit reports at least once a year or before making any major purchase to ensure the accuracy of the information. 

Determine your credit rating. You can do this by contacting a credit reporting agency such as Equifax, Experian or Trans Union and you are entitled to one free credit report annually.  This can be obtained FREE from the Annual Credit Report website. Above all, don't hesitate to consult with your lender if you need to improve your rating.

What the scores mean. Ratings usually vary between 400 and 800. Anything above 620 is good. If you exceed 680, you are considered premium and may even get a lower interest rate.

1.3 Prioritize your Costs and Savings. Buying real estate wisely is all about credit and interest terms.

Prioritize your costs. Down payments, closing costs and additional expenses (such as surveys and inspections) should be at the top of your list. On the other hand, be sure to pay down on your current revolving and high-interest rate debts, such as credit cards, because this may influence your credit rating and interest rate.

Remember: lenders like stability. Instill confidence in your potential lender by avoiding any big, sudden moves both in your career and your finances. If that job change or big budget purchase absolutely cannot be postponed, check with your lender first and consider the consequences.