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Planning For Success Remember the old saying, If you fail to plan, you are planning to fail. That is especially true as you prepare for buying a house. Of course, avoiding ALL interest and paying cash is almost always preferred. However, ask your financial planner if the following idea may help you. Establish Credit with Four Active Trade Lines for 12 months - Remember, when a lender is considering giving you money they will look at your past in order to predict your future. Your credit score is strengthened if they see you've done well with four traditional trade lines such as a car loan, signature loan, student loan, automobile insurance, house rental, utilities, and credit card for at least 12 months each. Keep in mind, these trade lines must be in your name (not your parent or roommates name). If you don't have traditional trade line history they may consider non-traditional trade lines with less merit such as cell phone and apartment rental. Credit Score - Before a Lender will consider a long term financial relationship with you they will check your credit score. If you are serious about buying a house soon, make sure you don’t ask too many different companies to check your credit because this could lower your score significantly. Sometimes your credit card company will supply a credit score on your monthly statement. You can use the following as general guidelines: Great Credit: 760-850 Good Credit: 680-760 Fair Credit: 620-680 Bad Credit: Below 620 Your lender decides what you can borrow but you decide what you can afford. Lenders are careful, but they make qualification decisions based on averages and formulas. They won’t understand the nuances of your lifestyle and spending patterns quite as well as you do. So, leave a little room for the unexpected – for all the new opportunities your home will give you to spend money, from furnishings, to landscaping, to repairs. Historically, banks use a ratio called 28/36 to decide how much borrowers could borrow. An approved housing payment couldn’t be more than 28 percent of the buyer’s gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments, couldn’t be more than 36 percent. As home prices have risen, some lenders have responded by stretching these ratios to as high as 50 percent. No matter how expensive your market though, I urge you to think carefully before stretching your budget quite so much. Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most. Typical House LoansMerit Bank - Huntsville Creative Financing for House Construction / Renovation (short term)Merit Bank - Huntsville Land ONLY Financing (long term)Citizens Bank and Trust * DISCLAIMER - Financial ideas and links to third party web sites and service provider recommendations may be provided on this Keller Williams web site. If so, they are provided solely as a convenience to you. If you use these links, you will leave this Site. Keller Williams has not reviewed any third party sites and does not control and is not responsible for any of these sites or their content. Keller Williams does not endorse or make any representations about such sites, or any information or materials found there, or any results that may be obtained from using them. Keller Williams does not endorse, does not make any representations regarding, and is not responsible for, any products, actions or policies (including, but not limited to, any privacy policies or customer relations policies) of any third parties. If you access any third party sites linked to this Site or follow any recommendations on this site, you do so at your own risk. |
