Esther Talbert – ET's Blog

ET™s Blog Wednesday, March 23, 2011                                                                                                                                                                                                                

Visit www.yavapairealty.com Esther Talbert, Broker                            

It is a good idea to do some research and make preparations prior to applying for a loan.

Step 1 – Obtain a copy of your credit report

You are entitled to a credit report one time yearly for Free

Ordering the credit report from Equifax, Experian & Transunion separately may give different information.   Or you can order one report from all 3 (a tri-merge)

This is considered a soft pull and should not lower your credit score to obtain this report.

Should you want to additionally know your FICO score “ then there is a small charge associated with this.   Go to www.myfico.com.     If you are married be sure and pull both reports husband & wife.

Look over all the information on the report(s) It is fairly common that there will be some discrepancies and errors.   There is a possibility that there will be some corrections that will need to be made.  If you see things that are not yours or are incorrect.   Then go over these and make sure that you have accurate information prior to writing the Credit Bureau.

Send them a letter asking them to correct the inaccuracies and define exactly what they are tell them they have 30 days by law to respond to them.   If they say the creditor will not take them off then you must get in touch with the creditor and go over the inaccuracies in the same manner.   You will need proof of the inaccuracy.   Continue working with them and send registered mail and keep copies of everything.   Continue to work with the situations until all are resolved.   It may take several months but if you are persistent the issues will work out with respect to incorrect information or inaccuracies.

It is a good idea to pull your credit report annually to make sure that what information they have is accurate.

Even though it would be better if you dealt with it yourself, if you are uncomfortable with doing this process then there are professional credit repair companies that will do this for you for a charge.   Be sure to check and make sure they are reputable and have good references.   Make sure you know if they can help, what the charges will be and approximate amount of time it will take prior to getting involved.   The company below has helped clients of Yavapai Realty with success   www.andorracreditrepair.com     stephanie@andorracreditrepair.com

   Step 2- Add up your monthly debt payments- everything you are responsible to pay

• Charge Cards
• Auto Payments  
• Mortgages
• Educational student loans
• Child support “ etc

If possible pay off the smaller things “ get them out of the way “ pay down your debt to not more than 12-13% of your gross monthly income   If you file a 1099 and are self employed then this is of your net income.   This does not include your housing payment.

Keep at least 3 forms of credit open with around 10-40% of the line open and make sure your payments are current.  

Paying off the smaller things and paying down the others is a good idea and possibly increasing the line on the 2-3 that are remaining so you have credit that is unused and available to you.  

Do not have companies pulling a lot of credit checks for this can lower your FICO score if this continues.  

 Step 3 “ Get your annual tax records in order and finished and your year to date income and expense figured and finished ready to submit.    

If you are self employed you will need 2 to 3 years annual tax returns depending on the loan and your year to dates complete.  

If you have a W2 you will need your year to date and monthly gross income.

Step 4 – Job History – You should have approximately 2 years with the same company or in the same line of work with no times when you are not working.   Stay stable and don™t be moving around.   If you have job transfer this is fine.  

Step 5- Figure the monthly payment that you can afford.   Basically take 29-30% of your monthly gross income or your net monthly income if you are self employed.  

Example if you make $4000. Per month 29% is $1160. PM   This should represent your principal and interest payment (PI) plus your property tax, property insurance and any association fees (PITI) If you have monthly mortgage insurance this is added in as well.  A mortgage calculator will give you the mortgage amount you can possibly qualify for immediately once you have your Principal and Interest (PI) payment you can afford.   Go to www.yavapairealty.com and click on your mortgage payment calculator.  

Step 6 “ Save money “ put together as much liquid cash as possible if you are low on any kind of savings “ you will need 2 months reserves and your closing costs at the very least plus your down payment if one is required.      

Step 7 – Derogatory Information that is on your credit you need help with.   If you are overwhelmed with your debt and have things you need help with to clean up your credit then go for help!   There are professional programs out there that are excellent.   A very good source of information is www.daveramsey.com   Dave Ramsey is a national speaker and has an excellent program on getting out of debt and managing your finances.   Financial Freedom University has a course that is inexpensive and takes you through all the steps to financial freedom and relief.   It is a 13 week course for $99.   Some of the best money you will ever spend.  

There are also non-profit organizations that can help you consolidate and lower your interest rates on credit and make a plan for you.   www.familycredit.org

   If you have had a short sale or foreclosure

It may be that you can repair your credit within a reasonable period of time that will put you in a position to qualify for a loan if you have experienced a short sale.   Folks that have had a foreclosure it is usually 7 years before most conventional lenders will loan to you.   There are non-conventional loans however and private lenders that once you get on track will loan to you.   Get on track and save your money.   And there will be something that will make sense for your prior to 7 years.  

If you have had a bankrupsy it is 10 years before a conventional lender usually will take you.   Again if you get your finances in order there are other ways to obtain a loan other than conventional lending programs.

 Now that you have put your finances in order and know what is on your credit report then it is time to see what is out there in loan programs and pick a good lender to work for you in applying for a loan.   Look for the next ET blog “ Picking the right lender and loan program that is a good fit for your needs.    

When your credit and ability is in order you are in a possession to get preferred interest rates and better loans to benefit you!

Disclosure:   The information contained herein is meant to be an outline to help research and get prepared.   It is up to the person obtaining this information to check for themselves as to the accuracy and be informed on what they wish to do.