An article on CNN Money titled “9 Ways to Tough Out Tough Times” provides a number of ways to protect yourself during times of economic instability like our current situation.  While many of the talking points concern one’s financial portfolio and tips for trading in an unstable stock market, a couple of ideas deal directly with real estate buyers. 

The fifth item discussed in the article concerns raising and maintaining your credit score, one of the most important components analyzed by lenders when deciding whether or not to help finance your new home.  Not only does good credit make a lender feel more comfortable about lending money, but better credit may help you to get a lower interest rate.  The article states that the two most important factors with maintaining good credit are your payment history and account balances.  Paying bills on time should be a no-brainer (and accounts for 35% of your credit score), but keeping your account balances below 50% of your credit limit dramatically improves your overall credit score (this accounts for 30% of the total score).  The article also advises you to not open unnecessary accounts or make too many credit requests, as multiple credit inquiries could ding your score.   Credit history is important because it establishes your payment history, showing any potential lender that you have a good background with regards to paying off debt.  Even if buying a home is not in the foreseeable future, taking these steps now can make obtaining a loan for your first home that much easier.

The seventh talking point in the article concerns finding a great deal on a mortgage, something that is on everyone’s minds these days when thinking about a real estate purchase.  One of the reasons that the housing market is in trouble is due to unscrupulous lenders taking advantage of people with little money and substandard credit by offering them loans that looked good on the surface but turned out to be nightmares when the interest rates adjusted.  In these tough times, banks are much more careful when lending money, and securing a good interest rate might mean putting down at least a 20-25% down payment.  The article states that buyers can find good interest rates without having to deal with mortgage brokers, who may add upwards of 27% to a loan’s fees.  The article suggests going to a site like bankrate.com, where you can put in your desired location and loan amount to discover different lenders in the area and their loan terms.  Once you narrow down the list to a couple of potential lenders, contact each of them and ask for a good-faith estimate (usually free of charge).  The interest rates you receive from each may be in the same ballpark, but pay attention to the additional fees they charge for loan origination, document preparation, etc.  This takes a little work on your part, but it could end up saving you a nice chunk of change in the long run.

For more information on tips to help your purchase of San Clemente real estate become a reality, please do not hesitate to contact us. 

This entry was posted on Thursday, October 9th, 2008 at 12:03 pm and is filed under Buyer & Seller Tips, Financing 101, Real Estate, Top 10. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.