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Ten Steps to Getting Your Finances in Order 1. Develop a family budget. Instead of budgeting what you’d like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses such as car repairs, illnesses, etc., as well as predictable costs such as rent. 2. Reduce your debt. Generally speaking, lenders look for a total debt load of no more than 36% of income. Since this figure includes your mortgage, which typically ranges between 25 -28% of income, you need to get the rest of your installment debt - car loans, student loans, revolving balances on credit cards - down to between 8 and 10% of your total income. 3. Get a handle on expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. you’ll probably see some great ways to save. 4. Increase your income. It may be necessary to take on a second, part-time job to get your income high enough level to qualify for the home you want. 5. Save for a down payment. Although it’s possible to get a mortgage with only 5% down and sometimes even less - you can usually get a better interest rate and lower overall cost if you put down more money. Shoot for saving a 20 percent down payment. 6. Create a house fund. Don’t just plan on saving whatever’s left at the end of the month toward a down payment. Instead decide on a certain amount each month you want to save, then put it away as you pay your monthly bills. 7. Keep your job. while you don’t need to be in the same job forever to qualify, having a job for less than two years may mean you have to pay a higher interest rate. 8. Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills. pay off the entire balance promptly. Eight Ways to Improve Your CreditCredit scores, along with your overall income and debt, are the big factors in determining if you’ll qualify for a loan and what loan terms you’ll be able to qualify for. 1. Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management. 2. Pay down credit card bills. If possible, pay off the entire balance every month. However, transferring credit card debt from one card to another could lower your score. 3. Don’t charge your credit cards to the maximum limit. 4. Wait 12 months after credit difficulties to apply for a mortgage. you’re penalized less for problems after a year. 5. Don’t order items for your new home you’ll buy on credit - such as appliances - until after the loan is closed. The amounts will add to your debt. 6. Don’t open new credit card accounts before applying for a mortgage. Having too much available credit can lower your score. 7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lenders are counted as one inquiry, by most lenders, if submitted over a short period of time. 8. Avoid finance companies. even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor Five Factors that Decide Your Credit Score Scores range between 200 and 800. Scores above 620 are considered desirable for obtaining a mortgage. These factors will affect your score. 1. Your payment history. Whether you paid credit card obligations on time. 2. How much you owe. Owing a great deal of money on numerous accounts can indicate that you are overextended. 3. The length of your credit history. In general the longer the better. 4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay promptly. 5. The types of credit you use. Generally, it’s desirable to have more than one type of credit - installment loans, credits cards, and a mortgage, for example. Time line for the loan process 1. The buyer meet with the loan officer to fill out the loan application, pays for the credit report and the appraisal if they have an accepted sales contract on a house. 2. The loan officer pulls a credit report. If everything is ok they will submit the application to their processing department. However, there are now a few mortgage companies that have the loan officer process the loan too. If there are problems on the credit report the loan officer will call the buyer(s) and try to get it worked out. 3. During the processing period documents and/or phone calls will be made to verify the information given. The appraisal, termite inspection and a home inspection and/or survey if the buyer has requested one will be ordered. This is also the that a loam commitment letter may be given. 4. The home inspection is usually the first report to be returned for the buyer(s) okay. If everything is fine then thing proceed. If there are items that need to be worked on then depending on what the sales contract says what will happen next. 5. If the home inspection is okayed by both buyer and seller. The nest step will be the appraisal. If this shows the home is valued at least for what the house has sold for then things move along. If it doesn’t then what happens next will depend on what the sales contract says. 6. Next comes the termite inspection. If the house is clear of live active termites and no damage the termite company will give a clear termite letter for closing. If there are live active termites the home will have to be treated and any damage will have to be fixed before a clear letter will be given. 7. Once all the documents are back into the loan processor's office they will move the file into the loan underwriter’s office. This person is responsible for making sure all the documents are in order, that the buyer does qualify for the type of loan they have applied for and generally double checks the work of the loan officer and loan processor and then okays the loan. It is not at all unusual for problems to surface at this time. Don’t panic most of the time they get worked out it’s just things that may have be over looked or misplaced. Cooperate with the request as quick as possible. Files are worked in the order they come in. So you don’t want to be dropped back to the bottom of the list again. 8. When the loan is approved in underwriting the closing package is forwarded to the closing attorney’s office. 9. The closing attorney’s office will order the title report and set a date and time to close. They will request any additional information that is needed. Again cooperate as soon as possible so they don’t move on to another file. 10. Request from the closing attorney’s office that the day prior to close you receive a copy of the closing statement (HUD 1 statement) so that you can confirm the numbers. 11. Be on time for closing and allow at least 2 hours at the closing attorney’s office. It may be less or it could be more. Most people take the day off work to make it less stressful. If you have been asked to bring something to closing make sure you have it, or you will have to make a trip to get it. You will need a picture ID at close. 12. If you are the seller - in the state of TN you and the buyer will need to sign the property disclosure again stating that nothing has changed on the property from the time of the sales contract to closing. And if there have been changes you will need to notify the buyer on the property disclosure on the changes and both parties have to sign. 13. At closing keys, warranty papers, door openers, etc.. will be exchanged. The closing attorney will disburse the monies if the loan has received funding. If the loan has not received funding the monies will be disbursed as soon as it does normally within a few hours of closing. Would you like more info or do you have questions call or email me I'm here to help. Leta |
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