Page 10 - How To Buy A Home In Louisville

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Financial Advice

1 Pay off minor debts:

If it is possible to do so without adversely affecting your down-payment situation, pay off mi-
nor debts. The less debt you have the easier your mortgage process will be. Call your mortgage
loan officer to ask if you should pay off any credit cards or close any credit card accounts. It is
important to keep the cards with a small balance and low limit that you have had a long time.
Close high limit cards you don’t use much, like department store cards. BUT WAIT! It’s good to
have a little bit of credit to show banks that you have had loans and credit cards in the past,
and that you have managed them properly. Consult a lender BEFORE you start paying off and
closing your cards. We had a client once close down everything and then the lender said that
he couldn’t get a good loan because he didn’t have a credit history. You might read books or
hear talk shows talking about why you should be debt free—well it’s not necessarily a good
thing when applying for a loan. Banks want to see a credit history. Two of these “open” lines of
credit are good. An example of this is a car loan, and you should also have two small-balance
credit cards that you pay every month on time.

2 Do not incur any new debt:

Many mortgage applications have been stopped in their tracks because the applicants decided
a week before the application that a shiny new car 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), a newly acquired debt could make your total
monthly bills too high and throw off the ratios, which would make the mortgage unobtainable.

3 Get pre-approved for a mortgage:

When it comes time to write an offer on your dream house, sellers typically won’t look at an
offer without a pre-approval letter. It is just as important to choose the right lender as it is to
choose the right Realtor® or closing attorney. Choosing the wrong one could result in delays
that cause your contract to expire. If another buyer has put a back up offer on your dream
home and your contract expires, you could lose the contract.

The River Valley Realty Group - How to Buy a Home in Louisville, Kentucky 8