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Spending some time getting your credit in shape, developing a budget and preparing your financial paperwork will result in a smooth home purchase process. Essentially, you can begin working on your home-buying escapade before you even begin shopping for a house. According to the National Association of Realtors, most buyers take nine weeks to actually buy a home. Your financial preparation should begin well before those nine weeks.


Steps to take before submitting an application
1- Get your credit in order.
2- Arrange your documents.
3- Analyze your budget.

It is very common for local governments to offer down payment or interest rate subsidies to buyers that agree to purchase homes in certain areas. And governments or employers may subsidize fire fighters, police officers, teachers, fire fighters, nurses and other service professionals who have a hard time affording homes located in higher priced areas. For example, a police force trying to recruit and retain officers may offer a down payment loan, which is forgiven and developed into a grant if the officer remains employed with the police force for several years.

Before you begin shopping for a home, utilizing the steps below will insure that you receive the most optimal rates for your loan and make your mortgage application process hassle free.

Getting your credit in shape: Obtaining a copy of your credit report
You can obtain a free credit report copy when you enroll for a free trial offer of the credit monitoring program. Once enrolled, you will receive your credit profile as reported by all three major bureaus as well as helpful information on what you can do to improve your credit rating and score.

It is important that you look for mistakes on your credit report, including account errors and outdated info. It is also vital that you look for accounts that are not yours. This can be a sign of identity theft.

If you do spot error/s, you will need to take the appropriate steps to remove credit report mistakes. We also sample a dispute letter that will assist you in credit fixing process.

How is your credit?
Eliminating credit card debt will help make your financial picture better. It is important that you do not close any accounts because reducing your available credit will in fact reduce your credit score.

It is recommended that if you have a home equity loan or line of credit, that you try and pay down your mortgage in preparation for a new home purchase. However, some experts feel buyers should hold on to their equity loans so that they can use it as a bridge loan to cover the costs of down payment until you sell your old home.

Get more information regarding the value of credit and mortgages.


Get your financial paperwork in order
It is important that you obtain all of the financial documents that your lender is going to need in order to accept your application. This includes copies of bank and investment account statements your income tax returns, W-2 wage statements, paycheck stubs, divorce decrees and child support documents and recent credit card statements. Making these documents handy will help you develop a budget that will help you determine what you can afford as a down payment and toward future monthly payments for your mortgage, including property taxes and homeowners insurance.

Documents to gather:
-Past two years tax returns
-W-2 income statements.
-Two most current pay stubs.
-Latest credit-card statements.
-Recent bank and investment account statements.
-Child support documents and divorce decrees

Developing a budget: Determining how much house can you afford
There is often a significant difference between the amount a homebuyer can qualify for, and what they actually can afford. For example, if you are having a hard time paying your rent, and you qualify for a mortgage that is more than your rent, proceed with caution. You do not want to commit to a loan that you are going to have a hard time paying. Not being able to pay your mortgage can result in foreclosure.

On the other hand, first-time buyers, in particular, usually do not know or understand the tax benefits of owning a home. These benefits can offset higher payments.

Keep it steady
As soon as you begin zoning in on your purchase, particularly if you already applied for a mortgage, do your best to avoid changing your financial status. At the closing , you will be required to sign a document that indicates that your credit is the same as when you initially applied for the loan.

If possible, avoid changing jobs. Lenders prefer to see a consistent history of employment and look down upon job changes while your application is being processed. That is unless your new job is in the same field with the same or greater salary.

Related Reading:
-Credit Scores and Mortgages


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