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:
Credit card information
Recent pay stubs
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
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.