Home Financing - The Basics

by Matthew Hick - Date: 2006-12-06 - Word Count: 529 Share This!

There are many variables which determine how simple or difficult it will be for you to finance your home. For example, inflation as well as earning potential can affect your financing. Let's take a look at a few of these variables and discuss how you can use them to your best advantage.

What can you afford?
When deciding to finance a home, it is of the greatest importance that you figure out exactly how much you can actually afford. When you meet with a loan officer from a bank for the first time, he or she will calculate what you can afford based on several criteria. In the end, he or she will tell you exactly what price you can look at paying.

If you honestly cannot afford a house at this point in time, it is better to save your money until the time is right. You would not want to risk going into a great deal of uncontrolled debt, just so you can say you are a homeowner.

What to expect when meeting with a loan officer:
During your visit with this loan officer, you will most likely need to show him or her your two-to-five year financial history. This history should include your income, assets, and credit. Your income is defined as the gross monthly income you earn, as well as income from extra jobs, dividends, bonuses, and child support. You will also need to show the loan officer your credentials. These include your employment and educational history. Your current employer may even need to provide your loan officer with a letter of recommendation or W-2 forms.

When meeting with the loan officer, you must also be prepared to discuss your assets. These assets are monies that are in your checking accounts, savings accounts, stocks, bonds, certificates of deposit, pensions, and insurance policies.

The loan officer will also look at your credit history, including all of the outstanding debts you may have as well as any car or bank loans you have. A credit report will almost always be done to provide the loan officer with a history of your debt payments. If you find any discrepancies in your credit report, it is highly important that you address them right away. Understand that your credit score is just about the most important factor that will be looked at when you are waiting to hear if you got the loan or not. By looking at your credit score, lenders will be able to determine how responsible you are for making payments on your debts. Lenders want to see that you will be able to pay a monthly mortgage as well as pay on all of your current debts, and still have money to put in the bank each and every month.

Understand the terms of your loan:
Nothing could be worse than not being prepared to pay for your loan. Typically, this does not happen, as loan officers ensure that you know what you are getting into. But, it is definitely in your best interest to learn all that you can about the loan you are signing up for. If you have any questions whatsoever – ask, ask, ask!

Related Tags: real estate, real estate investing, real estate law, real estate financing

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