Hello and welcome! Today on the Blue Ridge Fine Properties Show we are going to chat for a sec about seeking to finance, also known as applying to borrow the money to buy a house. Some people think this is boring, but I am a nerd because this is one of my favorite topics!
Financing is one of my favorite topics because I love freedom. And after decades working in and around real estate as a renovator, investor, and landlord, I am a very firm believer that your real estate purchase should create freedom, not strangulation.
Buying your house should never leave your budget so thin after you make that monthly payment so that if your car needs a repair you are left facing unpleasant choices.
And yet, it is not widely publicized that the best way to shop is to have that piece ironed out on the front end so that you can be shopping in the right price range to correspond to the monthly payment that will create the most freedom for you. (Wow! That’s a mouthful, but an important one.)
My personal friends, family, and past clients know this about me – that I love to use real estate to create more (not less) financial freedom. And when folks who have found me on the internet call me, I always ask them about financing.
Sometimes what they hear at first is that I want to make sure that they are worth my time in working with them. I am quick to let them know – it’s really not that at all! We offer a service specific to people, and that service is finding their castle, no matter the price range. So it’s not at all vetting their human worthiness! To us, your human worthiness is a given!
The reason I ask is that we need to laser focus in on your purchase price so that it matches what you want to pay per month. In a bustling world, we need to be shopping smart.
We all know what it is like to find a beautiful sweater for an awesome price. We LOVE that sweater for $30. But do we love it for $80? Maybe not as much. We have all been shopping with target-spend in mind our whole lives! This is the very same thing.
Having the information on the front end from a lender, information which is tailored specifically to you and your financial situation, is crucial before we even hit the road to look at homes in person.
So if you are ready to look at the inventory that is out there now, it should be because you are ready to make an offer now. If you won’t be ready for a year, these are not even the same homes that will be available then! So if your timing is far in the future, your job right now is tweaking your credit to make the lenders vie for your business.
Here are a few tips to get you started out on the right foot:
Know your scores. Create an account at a site like CreditKarma, and follow your score. It’s free! One of the cool things about that site, too, is that you can simulate your score. So you can look at how your snapshot would change if you paid off $750 on that credit card – how much of an impact that would make. You can watch your credit score go up. That’s inspirational!
Please realize that this is a 3rd party site, though. It is not one of the big three (TransUnion, Experian, and Equifax.) Lenders will be pulling straight from those three primary sources, and there can sometimes be a discrepancy. So Credit Karma is just a start, a free place to begin to get more familiar with the process of getting close and personal with your credit snapshot.
Read more about how your credit score is calculated.
Try to keep credit card debt in check, and pay your balances down in preparation. It makes a big difference! Lower balances will earn you a higher credit score. Higher credit score means better interest rate.
Make sure that your taxes are filed for the last two years, and that if you owe money you have established a payment plan with the IRS. As part of the lending process, you will submit your returns, and the lender will check with the IRS to ensure that these specific returns match the ones that you turned in to them. Believe it or not, I have seen folks turn in different returns than the ones that they submitted to the IRS. Please know that this will be discovered, and it’s an issue that may well prevent you from being able to purchase until it is cleared up.
If you have a down payment saved, have it in an accessible account. If you are getting a gift, your backer should be prepared to send along a letter saying that they gave you the money and are not expecting that money to be paid back.
Also, I always suggest to folks that they look at the interest rate, but don’t get too caught up in it. It’s not a competition! It’s the monthly payments that you will be interacting with from here on out. This is the check that you will write every month. Can you get the home you love for that monthly payment? Then get it! And start paying into your own pocket right away.
All of this on the table, I am not a lender. Only a qualified lender can give you a true individual snapshot of your financial situation and lending process. I have several great ones that I work with and am happy to refer you based on having had excellent experiences.
Please give us a shout if we can be of assistance, We are here – full time all year round!