Getting your Financial Picture in Focus

Here's some important advice: as soon as you have made the decision that you want to buy a house, one of your first steps should be to make certain that you have a clear picture of your financial situation. At a minimum, you will most likely want to do the following:

• Run a Credit Report to make certain that there are no discrepancies or problems in your credit history. There are places on the internet where you can get your credit report, some of them for free. A good starting point on the internet is www.iplace.com. You can also simply call the three major credit reporting companies and request your credit report. In Georgia, you are allowed two free credit reports per year. The numbers to call are : Equifax (800) 685-1111, Experian (866) 200-6020 and Trans Union (800) 888-4213. In each case, you should try to get them to include your credit score if possible.
• Begin to gather items such as: last 3 years Income Tax returns, current copies of pay stubs, records of any past derogatory credit history that has since been paid off, and records of any supplemental income you may have. If you are self employed, you will need all business records and tax returns for the last 3 years. Having these items close at hand will save an enormous amount of time when the Mortgage Company begins to ask for them (and ask for them they will!)
• Do not incur any new debt. Many mortgage applications have been stopped in their tracks because the applicants had decided a week before the application, or worse yet a week before closing, that a shiny new car with a big finance or lease payment would look just perfect in the driveway of their new home. Since mortgages are based on debt to income ratios (the amount you pay out monthly versus the amount you bring in), and most mortgage companies pull credit reports on the day of closing for final review, a newly acquired debt could be enough to throw the ratios off and make the mortgage unobtainable.
• Do an analysis of what your current financial situation is: where the money comes from and where the money is presently going. Develop a household budget for your current situation. Get into the habit of using it on a consistent basis!
• Keep your spending patterns in check.
• Do an analysis of how a house purchase will affect your budget. Be sure to factor in not only mortgage payments (including insurance and taxes) but also funds for items such as repairs and maintenance.
• If it is possible to do so without adversely affecting your down-payment situation, pay off minor debts. The less debt you have the easier your Mortgage "sailing" will be.