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Oct 1 2012 12:00AM

Question

I am getting ready to receive a trust. My husband and I would like to buy a house and the down payment would be half the price of the house. Our ages are right under 60 years old and we both have horrible credit. We would be first time home buyers. Do I need a planner or a credit specialist? 

Answer

As you get ready to make a decision on purchasing a home, I recommend you consult with a financial planner to make sure you are able to financially handle the projected future cash flows for your new home. You mentioned the down payment, but there are other expenses associated with the purchase including loan costs, new furnishings, property insurance, property taxes and home maintenance among others. A planner can help you evaluate whether your future cash flow will comfortably support these additional expenses.

It would not hurt to speak with a credit specialist about your credit history. Either a planner or the mortgage professional you work with to secure a home loan should be able to refer a qualified credit specialist to you. Your credit history will be a major factor in securing a loan for your new home so if there have been past issues that affected your credit standing, you may need to take actions to improve your credit before a loan will be granted. A qualified credit professional can help you by identifying what needs to be done (if anything) before you apply for a loan and can guide you on how to rebuild and maintain a good credit standing. You can also get your credit report online and dispute every negative item (regardless of whether it is correct or not) to see if the company will remove it. Having some credit card or some debt that has good history is important. Keep in mind, your credit score is only one factor in securing a loan. A 50% down payment is good. Also, lenders like to see steady income (IRA distributions usually count).

If you decide to move forward with a home purchase, you will need to work with a mortgage broker. A mortgage broker will save you a lot of time. Instead of applying for loans with several banks, you complete one application, and pay for one credit report, and your mortgage broker will “shop your application” with several lenders. A mortgage broker also has access to many different lenders, and will be able to help you match your situation with a lender willing to offer you a mortgage. Find a mortgage broker by asking friends and family for introductions. Also, your local Chamber of Commerce is a good source.

To find a financial planner in your area, please visit FPA PlannerSearch.

 

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