Property Grunt

Friday, December 10, 2004

How the magic happens. Are you ready to buy a home?

I stumbled on the New York City Government site describing the home buying process while researching noise issues. I have noisy neighbors, which is a story for another time.

Now I want to make something very clear. This information I am presenting is just information and will give you a better insight of how the magic happens.

Before even buying property you should take a hard look at yourself in these 4 areas.

Job History

Do you have a job? I know it sounds like a stupid question but seriously how else how are you going to pay for your home? If you decide to get a mortgage the bank wants assurances on your ability to pay back the loan.

According to the site

Generally, if you have held each of the jobs you've had for two years or more, the mortgage lender will consider your job history steady.

If you have changed jobs frequently in the last two years or have unexplained gaps in your work history that you cannot explain, then you probably want to wait to buy a home until you can present a more stable employment pattern. Job changes for a better salary, to attend school or to take care of children are examples of acceptable explanations for an unsteady job history.

Banks like stability. It signifies consistency on your part and it means they will be getting their money back. In a sense a mortgage is an investment for the bank. They are loaning you money and gambling that you will not only pay them back in a timely fashion but also pay any interest generated on the loan.

How is your credit rating?

Are you late paying your bills? If you are, start being early on your payments. Every time you are late on a payment or default on a debt it is recorded on your credit report.

In order to gauge your consistency in paying bills, a lender will order a credit report from an independent credit reporting company that will show the history of any debts you have accumulated over the years and how well you have managed them.

If you have any problems on your credit reports you better be able to have a good explanation to provide to your bank.

A credit report is a vital document that can determine whether a bank authorizes a mortgage or not. SO TAKE CARE OF YOUR CREDIT CARDS AND PAY YOUR BILLS!

Don't believe me. Go to this link Secret History of the Credit Card.

This program will make you never want to use a credit card ever again. Btw, if you have any credit debt, get rid of it. I don't care if you want to save your money for a rainy day. That credit debt is a liability so pay it off.

Landlords also use the credit report to determine if a potential tenant is a risk. If they don't this often happens.

The credit report is also part of your Fico score that stands for Fair Isaac Credit Organization.

According to My Fico

A fico score is:

It's a number lenders use to help them decide: "If I give this person a loan or credit card, how likely is it that I will get paid back on time?" A FICO score is a snapshot of your credit risk picture at a particular point in time. The higher your score, the lower the risk to lenders. Fair Isaac Corporation develops the mathematical formulas used to produce FICO scores.

Your fico score consists of the following:

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What if you don't have a credit history?

According to the homebuyer's guide

Lenders will accept proof such as canceled rent checks or copies of phone bills that show you have no outstanding balance. If you have a history of paying your bills on time, you should still be able to qualify for a mortgage.

In my next entry I will get into the nitty gritty of down payments and closing costs.