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Here's the good news: More
people than ever can buy a home.
Now for the bad: It's going to take a lot of patience,
restraint and some careful planning to get there. That loan
officer sitting across the table won't look kindly on the new
Lexus you bought or the stack of credit card bills on the kitchen
counter. And if you've only managed to put away $1,000 in savings
by then, it'll be time to forget about the $300,000 beach house.
To pull the purchase off, try heeding some of
the guidelines below that our experts suggest. It may not always
be fun, but doing so will help get you where you want to go.
Pay your bills and start saving
"No. 1, pay your bills on time. There is no single element
that can so dramatically impact the success of an application
as your credit history," says Brian Israel, vice president
of Chicago-based Harris Trust and Savings Bank's residential
mortgage division. "Another thing, of course, is savings.
People should have a good disciplined savings pattern."
"That's the kind of behavior that's going to make them
a successful homeowner."
Everybody comes into the real estate market with
a different perspective and level of experience. The fact that
online mortgage applications, new loan products and rising interest
rates are competing for attention these days makes it all the
more difficult to give foolproof advice. But some general rules
apply to pretty much anybody when it comes to getting the money
to buy a home. So here are some of the do's and don'ts that
buyers will want to consider.
Five do's
1. Make loan and other debt payments on time, especially over
the months leading up to the filing of your mortgage application.
It sounds simple, but every 30-, 60- or 90-day delinquency on
a loan or credit card is going to reduce the credit score the
lender ends up considering as part of the loan file. That score,
in turn, will determine how good a loan you get -- if you get
one at all.
2. If something has to be missed, miss the credit
card payment first, followed by the payment on any installment
loan you might have and finally, the payment for an existing
mortgage. That's because credit scoring systems look at the
performance of similar loans first when deciding what type of
score to assign. It will give the most weight to the performance
of another mortgage, for example, then the performance of something
like an auto loan, which features fixed payments and a fixed
rate the way many mortgages do. Lastly, it would evaluate the
payment performance of so-called "revolving" loans,
like credit cards, which feature variable payments that fluctuate
with the outstanding balance.
"If you had to prioritize -- and we would
hope you wouldn't be in that situation -- pay your mortgage
loans, pay your installment loans, pay your revolving loans,"
Israel says.
3. Consider paying off more debt and putting down
a smaller amount at closing. The move leaves borrowers with
larger mortgages, but it will allow them to replace non tax-deductible,
high-interest rate debt with lower-rate mortgage debt that features
deductible interest.
"We see that trend in the marketplace, whether
it's a refinance transaction or a purchase transaction,"
says Larry Hamilton, chief executive officer of SouthTrust Corp's
mortgage lending division in Birmingham, Ala. "They are
putting less equity in their homes, borrowing more against the
homes and they're paying off consumer debt, at least for a while."
Article continued at http://www.bankrate.com/brm/news/mtg/19990708.asp?prodtype=mtg
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