Reviewing Your Finances

Are you thinking about buying a house? If so, you've probably wondered how much house you can afford - and what size loan you qualify for. Well, why not find out where you stand? The first step is to review your financial situation to see exactly where you are today and what you can do to prepare for this major investment.

Start by thinking like a lender. When lenders consider your application, they take a look at:

• Your income
• Your savings
• Your credit history
• Your debts

They want evidence that you are a good credit risk, and that you'll be able to make the payments. Take a clear look at your situation to see what they'll see. You might want to consult a mortgage/loan consultant, to get some help evaluating your situation and clarifying loan packages and amounts available.

Once you understand your finances through the eyes of a lender, you can make adjustments to ensure you get the loan you want. If your financial picture has some weaknesses, consider taking action to improve it. Here are strategies that have helped others. And yes, these suggestions may seem obvious. But on the other hand, some of us lose perspective when it comes to our own financial lives!

See what you can do to increase your income. You may need to get creative - here's how others have done it:

• If you're expecting a raise in the near future, ask your employer to provide verification of any increase planned for your salary.
• If you have incentive or profit sharing at work, discuss with your employer whether you can increase your monthly salary in exchange for reducing your profit sharing - regular income looks more secure to lenders.
• Consider whether you can change jobs within your company to increase your salary.
• If you have a spouse or partner who's not working, consider whether he or she could take a job to add to your monthly income stream.

Figure out ways to increase your savings.

• Reduce your routine expenses as much as possible - cutting out just one dinner a week will give you a tidy chunk of savings at the end of the year.
• Hold off on buying that new refrigerator or wide-screen TV for now.
• Plan a monthly budget and stick to it. You'll be amazed at how much you can save when you pay attention to where your money goes.

And while you're at it, reduce your debt.

• Try not to charge more on your credit cards than you can pay off every month. Keep the balance low, or pay it off completely.
• Pay down any outstanding loans if they do not have a pre-payment penalty.

And finally, work to build a good credit history by:

• Making all your loan and credit card payments on time.
• Not bouncing checks.
• Filing all your tax forms on time, and paying anything you owe on time, too.
• Monitoring your credit, and fixing any problems you may have.

Knowing where you stand financially provides a strong foundation for beginning your home search. And once you clarify how to reach that goal, you'll be that much closer to owning the home you've always wanted.

Gwen Hoople, Mortgage Consultant, is happy to discuss your situation and help you assess how much of a home loan you can afford. Call her at 510 301 3037.