Abode

GreenPath Debt Solutions’ tips for home buying success

Farmington Hills, Michigan--With warmer months fast approaching, many consumers are pounding the pavement in search of a new home. April is financial literacy month--a good time for consumers to have their finances in order when considering what may be the largest purchase they will make in their lifetime.

A consumer’s financial history and credit rating is one of the biggest factors affecting mortgage loan rates. Typically, the better the financial history and credit score, the better the loan rate. GreenPath Debt Solutions has compiled some helpful tips for the millions of Americans thinking of purchasing a home this spring:

o Develop a plan to buy a house. Examine your current financial situation to determine how much of a mortgage you can afford. Be sure to include all of your monthly expenses such as home and cell phones, Internet access fees and homeowner’s insurance. Generally, lenders allow no more than 25 to 28% of your gross monthly income for housing costs. It’s also important to maintain a rainy day fund for unexpected emergencies.

o Establish a stable employment history. When considering your capacity to repay your loan, lenders look for a solid employment history (two years or more with your current employer).

o Start a savings plan. Set aside as much money as you can for out-of-pocket expenses. A down payment and closing costs are sometimes as much as 10% to 15% of the home’s selling price. It’s best to overestimate these costs than to underestimate them.

o Know what’s on your credit report. Obtain a copy of your credit report and diligently correct erroneous listings as well as repair damage caused by late and negligent payments. Lenders will look at your debt-to-income ratio to determine how much of a loan you can afford.

o Consider getting--pre-approved for a loan before house hunting. Getting pre-approved will save you the potential embarrassment of being turned down for a loan during the often competitive process of bidding on a house.

o Sign up for a homeownership course. Since 1968, GreenPath Debt Solutions has been certified by the Department of Housing and Urban Development to offer free housing counseling to consumers. You’ll learn about fair housing laws, closing costs and how to budget for home ownership.

o Appraise and inspect the property. Potential homebuyers should obtain an independent certified appraisal report to capture the market value of the property.

You should also obtain an independent certified home inspection to uncover any hidden home horrors like leaky roofs or plumbing problems.

Having a good credit rating is the key to securing a lower interest loan. In addition to following the tips outlined above, continue to make sure that every bill--from rent, credit cards, student loan payments, car payments and any other debt--is paid in full and on time.