The process of home ownership begins long before a potential buyer starts looking for actual properties. A history of smart credit and borrowing decisions contributes to what is usually the largest purchase in an individual’s lifetime. Lenders know that no one is perfect, but hopefully a borrower has taken his or her credit seriously, paid debts on time and demonstrated responsibility and stability.
BUILD YOUR GREEN FILE
Anyone thinking about becoming a homeowner should compile and organize a green file and have it ready when the time comes to apply for a loan.
A green file should contain your financial records and list your assets available for a down payment so that a lender can get an idea of what kind of borrower you will be. Every potential homeowner should have a green file containing the following:
- Financial statements
- Bank accounts
- W2 for two years
- Recent pay stubs
- Tax returns for two years
KEEP AN EYE ON YOUR CREDIT RATING
Your credit rating is one of the most important ways that a lender can gauge your trustworthiness as a borrower. Your credit history is comprised of the number of loans you have taken and your punctuality in repaying these loans. This includes credit card debt and payments and other monthly financial responsibilities. A credit rating above 680 is considered average. A score of 740 is good, and above that you may be considered premium and can qualify for a lower interest rate.
Potential borrowers should consider a loan pre-approval to expedite the process and strengthen their buying power.
Premier Funding Network offers a FREE Credit Report for all clients who get pre-approved.
PRIORITIZE YOUR COSTS AND SAVINGS
Preparing to buy a home requires that you prioritize your costs and expenditures. Building up savings to cover down payments, closing costs and additional expenses (such as inspections) should be at the top of your list. It is equally important to pay down on your current revolving and high-interest rate debts, such as credit cards. It may be wise to skip the annual vacation or buying that new car in order to beef up your available cash reserve. Buying a house is a major purchase and relatively minor changes in monthly costs for a year or two can go a long way in strengthening your buying power.
REMEMBER: LENDERS LIKE STABILITY
Keep in mind that STABILITY is something that lenders value in a borrower. 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 how the consequences may affect your chances at the best possible loan.
If you are thinking about purchasing a home, call Premier Funding Network at 714-283-9900 and let’s talk about your desire to step into a new home.
Even if your credit is not optimum, we can figure out where you stand as a borrower and provide you with excellent advice to improve your score and help bring you closer to making your dream home an obtainable reality.