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Financial Planning and Your Home Purchase

by The Jana Caudill Team

Planning on buying a home over the next two, three, five years?  Take the time now to put a sound financial plan in place that will set you up for success when you’re ready to make your home purchase.

SAVE for your down payment.  The days of no money down home purchases are gone, at least for the foreseeable future.  And coming up with enough money to satisfy the bank who is considering issuing you a mortgage doesn’t happen overnight.  What would it be like if you took an extra twenty, forty, even a hundred dollars out of your monthly salary and socked it away toward your down payment?  Saving money is a long term endeavor so you need to start now.  A smart person (I fail now to remember who it was) once said, “You’ll know you’re doing a good job saving money when it starts to hurt a little.”

CUT expenses.  In order to increase your capacity to save money you either have to make more money or cut back on the money you spend.  The best way to go from no savings to a nice sized down payment on a home is to look at your budget and make little cuts here and there.  Ask yourself, where am I spending my income right now?  How much money can I save by making my own coffee and skipping that daily stop at Starbucks?  What about fast food?  Try cooking at home one or two more times a week.  Cook enough so you have plenty of leftovers to take to work the next day for lunch instead of opting to super-size the number 5 at the drive-thru.  Cutting expenses and saving go hand in hand.

MONITOR your credit scores.  You’ve cut back on your spending.  You have even found a way to stick another fifty dollars under the mattress every month for the down payment.  None of this does you any good if your credit scores are in the tank.  Keep a close eye on your scores!  Make your payments on time.  That 30-, 60-, 90-day late payment can stick around to haunt you for some time!  No bank will give you a mortgage if they see you are unable to handle the bills you already have.  Get your free annual credit report here.  This report will show you your scores from the three nationwide consumer credit reporting companies, Equifax, Experian, and TransUnion.  Then when you’re ready to speak to a reputable Realtor your family finances will not hinder you when they help you find your dream home.

Education and Preapproval, The First Step

by The Jana Caudill Team

Whether you’re a first time home buyer or you’ve been through the home buying process many times before, do yourself a favor.  Make speaking to a mortgage lender one of your first priorities when beginning your new house hunt.

Unless you have just come into a windfall of cash you’re probably like the rest of us and need to get a mortgage in order to move into that dream house.  There are many reasons for speaking to a mortgage lender or mortgage broker up front.  A professional who deals everyday in these types of loans will know what the current rates are.  They will take into consideration your credit scores, monthly income, available savings for a down payment, and best available interest rate based on all your information to come up with the loan amount you qualify for.

Please understand the primary benefit here: education.  This is a process not to be taken lightly.  The lender’s job is not to put you into the biggest house (and by association the biggest loan) possible.  Their job is to counsel.  Through the interview process they learn about your financial situation and determine your expected ability to repay the loan over the five, fifteen, and most common thirty year term.  The lender can also let you know whether there are some items on your credit reports that are getting in the way of your getting a better interest rate, or simply getting in the way of your qualifying for the loan altogether.

The mortgage market has changed over the last few years, and it has become more difficult to get that perfect loan.  Today you need more money for the down payment than you may have needed in the past, and guidelines for qualification are stricter than ever.  Speak to a mortgage professional you trust.  If you don’t have one, speak to friends, family and neighbors.  Ask who they have used in the past and what the experience was like.  Ask your friendly neighborhood Realtor® for a list of reputable candidates.  The last thing you want to happen is to find your dream home, write and have your offer accepted by the sellers, then discover you can’t get the mortgage to complete the purchase.  Get prequalified first, and house hunt with confidence.

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