Financing your new home, the does and don’ts!

For all of you out there that are considering buying or building a new home, we would like to offer a couple tips on what works and what doesn’t.

The entire process of buying or building a home begins at The Bank.  Unless you are one of a very few people you will be needing a loan or mortgage from a bank, sometimes called The Lender to finance the purchase of your dreams.

Yes, there are a lot of scams out there and there are also a lot of very reputable banks and mortgage companies that will help you.  When you are applying for a loan a bank will look at three major factors:

  1. First – your income.  If you are a single person or a couple the bank is doing to need information about your household income; how much money do you make each month.  All of the bank’s calculations are done on a monthly basis.
  2. Second – your debt load, the bank needs to know how much you owe other people and your debt load is a combination of:
    1. Car loans – what’s your monthly payment for the car?  This is a good time for a small or nonexistent car payment
    2. Student Loans – the total of your student loans isn’t important, it is the monthly payment that will matter. 
    3. Credit card – again, your total debt isn’t as important as your monthly payment.  With credit cards, there is another part to consider.  Do you owe more than 32% of your credit limit?  If you have a credit card with a $10,000 line of credit it is very important that your total debt not exceed 32% or in this case $3,200.  The monthly payment is important but the percentage is also a big deal.
  3. Third - Credit Score – this is the number assigned to you from one of three credit rating firms.  The higher your score the better.  This is a very important piece of the financing puzzle.  It is also a part of the puzzle that many people forget about.

Other monthly costs such as electric bill, gas bill, insurance, groceries, clothing, etc. do not enter into the equation.  Only the three above.

I’m thinking it might be a good idea to have a discussion this week about finances. So, if you have a particular question and/or thought……………

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