Can You Take Advantage of Low Rates on Louisville Homes?
If you are planning to buy a home in Louisville in 2012, the combination of low prices and low interest rates are an irresistible combination to start the process. Both things assure that you can get plenty of house for your money and give you more freedom of choice. Unfortunately, taking advantage of the low interest rates is not a slam dunk if your credit rating is low. Many of the best interest rates are reserved for people with high scores above 750. To estimate your chances of claiming a low rate mortgage, you must take certain steps prior to or at the early stages of your house hunting.
First, know what you're dealing with. Pull a copy of your credit report to see what your score is and to determine whether information is reported correctly on your report. If you find errors, take the time to correct them. If you have late payments or other blemishes like past bankruptcies, repossessions, or judgments, nothing but establishing good payment habits and the passage of time will make them go away. The good news is, by improving your payment habits you can raise your score in a few months. Assuming that your finances are now on track, these blemishes will still impact your ability to get the best rate, but you may still be able to get a loan from some lender, even if your interest rate is somewhat higher.
One thing that creditors consider when determining your credit worthiness is your debt-to-credit ratio. They do not like nearly – maxed out credit cards and ideally want to see you using no more than 10 to 30% of your credit limit. If possible, pay down credit cards to conform to those limits. This may delay your homebuying process a few months, but it can be worth it if having a lower debt to credit ratio raises your score enough to enable you to qualify for a lower rate.
Before you go to the bank, consider what you can really afford to pay as a mortgage payment. You do not want to put yourself in a situation of being house poor. If you know you like to travel or enjoy hobbies, you realize you may have to cut down on these expenditures for a while but you do not want to sacrifice your lifestyle for a house. If part of your income goes to support your parents or you have pets with high vet bills, you need to plan for these expenditures. You may be tempted to gloss over these expenditures when you are discussing your finances with a loan officer, but you need to be realistic with yourself.
This is important because your next step to prepare for homebuying is to get preapproval from lenders on your financing. The lender will evaluate your credit report and tell you how much they will lend you. This amount may be more or less than you expect. If they tell you that you can afford a $2,000 house payment, but you know you would be struggling if it is more than $1,600, you need to follow your gut and only commit to buy a home that will leave you with the payment in that price range.
As a Realtor®, I respect the financial situation of my clients. I consider how much you are able to spend and do not show you multimillion dollar mansions if you're pre- approval limit indicates that you should be looking in the $150,000 range. It's true that some homes slightly out of your price range might be negotiated down to something you can afford, but you have to be realistic. A seller over million-dollar home is unlikely to cut the price to $100,000. If they do, consider watching the movie The Moneypit before going any further.
Buying a home? I want to work with you. Call me, Jessica Gaines, your Louisville real estate resource.
