Check out this Rent vs. Buying web site to compare the advantages of each. Thinking about changing jobs? It might be best to wait until after your purchase. Look at your work history. Is it sporadic or did you just start a new job? Lenders like to see someone with a steady work history and with job changes in the same line of work. Lenders will require your work history along with past tax returns.

Look at your credit report before you go to a lender. It is not uncommon to find problems with reports, especially if you have a common last name. If you find a problem, start with the reporting agency to clear it up. It is common to have a late payment at some time or another. These problems can usually be taken care of with a letter of explanation from you to the lender.

FICO Scores: What They are and Why They are Important
To get copies of your credit report, start at:
Experian
My FICO Score
Free Annual Credit Report

Banks/Savings and Loans vs. Loan Brokers

• Loan officers at a bank work for the bank.
• Loan brokers work for you and have a fiduciary relationship.
• Most banks cooperate with loan brokers.
• You can go to a broker and obtain a loan through a bank.
• Most banks will offer you a menu of programs while a loan broker will offer a
• menu of lenders. Banks and loan brokers are under different government controls.
• A complaint regarding a bank would go to the State Department of Banking.
• A complaint regarding a loan broker would go to the State Department of Real Estate.
• Contact someone from each source to see what special programs they have to offer.

Loan Pre-Approval

• Getting pre-approved for a loan is a necessary step when buying real estate.
• If you are pre-approved first you will save considerable time looking for a property.
• You will know how much a lender will commit so you won’t waste time looking at property you can’t qualify for.
• You will have a better chance of having an offer accepted if it is accompanied with a pre-approval letter.
• The best agents won’t work with buyers until they are pre-approved.

A lender will let you know your maximum loan amount after providing them:

• Income from all sources.
• Funds available for a down payment and closing costs.
• Your monthly obligations (auto loans, credit card payments, alimony, child support)
• Price range of homes where you want to locate.

Selecting a Lender
You should pick a lender based on experience, customer service and recommendations. Work with a lender who is experienced in the business, knows the availability of the different type loans and how to handle the demands of processing. Don’t make the decision based solely on which lender is offering the lowest rates. If a company is offering a mortgage package that is well below market rates, you should beware. All mortgage companies generally choose from the same pool of investors. A company offering abnormally low rates might make up the difference by increasing closing costs or tacking on additional settlement fees.

Determine how long you expect to live in the new home. This decision will not only affect the houses you look at, but also will determine the type and term of loan you choose. Get everything in writing and a copy of everything you sign.

Ask your lender at application what fees typically are included in the finance charge computation, and what fees may be charged separately at closing.

How Much Can I Qualify For?
Most lenders require your housing payments not to exceed 25-33% (depending on your down payment) of your gross monthly income called “housing expense ratio”. Your total debt payments should not exceed 33-38%, figured on a monthly basis. This figure is called your “total debt ratio”. Use the mortgage calculators to find out how much you can afford.

How Much Do I Need?
Besides setting aside money for a down payment, you will need money for closing costs. Those costs can range from $3,000 to $10,000, depending on the type of loan, the loan fees and the community the property is located in. The smartest and most time efficient thing to do is get pre-approved up front, before you start looking for a home. Next, find a Boca Raton real estate agent familiar with the area you want to live and you are comfortable with. Educate your self about local property values and the current market trend.

The scores range from the 300s to around 850, with higher scores indicating lower risk. Many lenders reserve their most favorable quotes of rates and fees for applicants in the upper FICO score ranges, 700 and above. Mortgage applicants in the low 600s and below get progressively higher rate quotes and are charged higher loan fees.

Your FICO score only looks at information in your credit report. However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.

Your Score Takes into Account:

• Payment information on many types of accounts, including credit cards, retail accounts, car and mortgage loans.
• Public record and collection items such as bankruptcies, foreclosures, suits, wage attachments, liens and judgments.
• Details on late or missed payments (“delinquencies”) specifically, how late they were, how much was owed, how recently they occurred and how many there are.
• How many accounts show no late payments.
• Length of Credit History

How Scores are Established:
Approximately 15% of your score is based on your credit history. Generally a longer credit history will increase your score. The score considers both the age of your oldest account and an average age of all your accounts.

10% of your score is based on new credit or if you are taking on new debt. Opening a couple of new credit lines in a short period will hurt this score. If you are planning on buying real estate in the near future, put off buying a car until after it closes. A new car loan can have a big impact on what price of house you can qualify for.

10% of your score is based on types of credit in use. The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.

30% of your score is based on amounts owned on all accounts.
Even if you pay off your credit cards in full every month, your credit report may show a balance on those cards. The total balance on your last statement is generally the amount that will show in your credit report. The score considers the amount you owe on specific types of accounts, such as credit cards and installment loans. Small balances without missing a payment shows that you have managed credit responsibly, and may be slightly better than no balance at all. Closing unused credit accounts that show zero balances and that are in good standing will not generally raise your score. A large number of accounts can indicate higher risk of over-extension.

35% is based on payment history. The first thing any lender would want to know is whether you have paid past credit accounts on time. This is also one of the most important factors though late payments are not an automatic “score-killer.” An overall good credit picture can outweigh one or two instances of, say, late credit card payments.