We've been talking about remodeling your home for several weeks. But as exciting as it may be to transform your home by updating your kitchen or adding a family room, that might not be the best solution for you.
Maybe with all things considered, it simply makes more sense to look for a new house. Or, perhaps you're dreaming about entering the proud world of homeownership for the first time.
On Grays Harbor, now is still a good time to buy a house. The jobless rate slipped down to the lowest it's been since 1976, interest rates are still reasonable, and it's definitely a buyers' market with more houses for sale on the Harbor at one time than there have been for years!
Whatever your decision - remodel, upgrade, or buy for the first time - a good next step is to take a hard look at your finances so you know just how much of a home you can afford.
Evaluating your credit
Because most folks don't have the luxury of paying cash for a new house, they have to find a bank or other lending institution willing to loan them the money.
Understandably, before lenders will give you money, they want to make sure you're a good risk for paying it all back.
They will look at things such as how much money you make, how much you've saved, and how steady you have worked. They're also concerned with how much money you owe other people for such things as cars, college tuition, credit cards, etc., as well as how you've paid off your bills in the past.
Have you paid every bill regularly and on time, or has your credit rating suffered because of missed or late payments?
One good rule of thumb is that a mortgage loan should not exceed 33 percent of your family's gross income. And, lenders are also reluctant to loan if your total debt reaches more than 38 percent of your gross income.
Getting your credit report
When lenders or other businesses extend you a loan or line of credit, they inform one or more of the large credit reporting agencies. If you make late payments, bounce a check or default on a loan, the affected business also notifies these agencies. This information forms your credit record.
The Fair Credit Reporting Act entitles you to obtain copies of your credit history. If you're thinking about asking for a loan to buy a new house, this is a good time to get a copy of your credit report. For one thing, sometimes the credit report can contain mistakes that could harm your ability to get a loan.
You can order a report from any of the three major credit reporting agencies by calling the toll free numbers and following the instructions. For each there is an $8 charge for the report. (However, if you're unemployed or low income, you may be eligible for a free report.)
Call Experian at 1-800-392-1122; or Equifax at 1-800-851-2674 or Trans Union at 1-800-888-4213.
Correcting your credit report
If you discover errors in your credit report, you should correct them before applying for a loan.
Contact each business that made an inaccurate entry and ask them to retract it. If they refuse, contact the credit reporting agency or agencies and tell them that you dispute the entry.
By law, the credit-reporting agency must include your objection in the credit report. If you find serious errors or encounter difficulty in fixing them, consider contacting a credit-counseling agency for advice.
Improving your credit report
If your credit report accurately shows that you haven't been paying your bills on time, or not at all, you must change your ways - and soon - if you hope to secure a loan.
Pay any past due accounts immediately. And begin establishing a good credit record by paying all your bills on time.
At Aberdeen Neighborhood Housing Services we have folks who specialize in helping you budget your money, improve your credit rating, and who will work to help you secure a loan.
Give us a call and we'll hook you up with our very own Royce Travis, a top-notch housing counselor. If there's a way to prepare you to become a homeowner, she's the one who can help you through the process.
Dave Murnen is the construction manager and Pat Beaty is a construction specialist at Aberdeen Neighborhood Housing Services, a non-profit organization committed to creating safe and affordable housing for all residents of Grays Harbor County. Do you have questions about home repair, remodeling or becoming a homeowner or a member of our contractor pool? Call 533-7828 or visit us at 710 E. Market St. in Aberdeen.
