Three Steps to Getting in the Right Financial Shape to Buy or Refinance a House
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
Three Steps to Prepare Financially for Buying or Refinancing a Home
Whether you're buying your first home or considering refinancing, getting your finances in order is essential. By following these three steps, you can secure the best mortgage rates and terms.
Step 1: Review Your Credit Report
Before you apply for a mortgage, it's crucial to know your credit standing. Under the Fair and Accurate Credit Transactions Act, you can obtain a free credit report once a year from each of the major credit bureaus: Equifax, Experian, and TransUnion. Visit [AnnualCreditReport.com](https://www.annualcreditreport.com) to access your reports via email, phone, or mail.
While these reports won't include your credit score, they provide a complete view of your credit history. Check for any late payments, errors, or signs of identity theft. Even minor issues, like a past-due utility bill, can impact your credit negatively, so address them now.
Step 2: Pay Down Credit Card Balances
If you carry credit card debt, focus on paying it off. Lenders evaluate your ability to repay total debt and will scrutinize your revolving account balances alongside your income. High balances can harm your debt-to-income ratio, even with a substantial salary.
A past client, earning over $70,000 annually, assumed his income guaranteed favorable loan terms. However, his high credit card balances led to less favorable interest rates. Avoid this mistake by actively reducing your debt.
Step 3: Save for Closing Costs
Closing costs cover expenses related to finalizing a mortgage, such as title charges and inspection fees. When refinancing, these costs can often be included in the loan. However, when purchasing a home, you might need $3,000 to $7,000 upfront.
While some loans allow you to finance closing costs, this often incurs additional fees. Alternatively, you might negotiate for the seller to cover these costs, but this affects the home's sale price and appraisal value. If the property's appraised value doesn't support the selling price, you may have to cover the difference. Therefore, it’s wise to start saving for these expenses early.
Final Thoughts
While not exhaustive, these steps will guide you toward securing an ideal mortgage. Before buying, be frugal and protect your credit standing.
About the Author
Cassandra Forbess is a loan officer specializing in mortgage planning at Mt. Financial Services in Portland, Oregon. For inquiries, reach out to cforbess@mtfinancialservices.com.
You can find the original non-AI version of this article here: Three Steps to Getting in the Right Financial Shape to Buy or Refinance a House.
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