Happy New Year! Is a new home purchase one of your goals in the New Year? The stable prices and low interest rates make the American dream of home ownership more affordable and very achievable. Today's interest rate for a FIXED rate 30 year loan is hovering around 4%! Due to the low vacancy factor in rental housing and recent increases in rent, payments on the purchase of a home or condo are similar, or in some cases less than, the rent payment that you may be making.

Investors should also take note for the same reasons. Interest rates for non-owner occupied homes are in the 4.5% range for a 30 year loan and the low vacancy rates have pushed rents higher. Along with cash flow, investors can take advantage of the tax benefits, including deprecation, tax write offs, and eventual appreciation. While real estate has not appreciated much over the past 10 years, historically it does, and when it does you will be the beneficiary of it. The beauty of owning investment real estate is that the tenant is paying off the loan, and at some point in the future you will have a free and clear property where the cash flow can help put a kid through college or supplement a retirement.

In applying for a loan, there are several important things the lender will look for, including credit history, stability of employment, and income. They typically will look at a two-year history of your life to determine employment and income history. Self-employed people will need to provide two years worth of tax returns and a year-to-date profit-and-loss statement on their business. The lender will then average the net income that is reported over the timeframe for qualifying purposes.

Owner occupied loans can be had with as little as 3% down. There are some first time home buyer programs that may be of interest that have income limitations based on family size. Non owner occupied loans typically require 20-25% down.

Planning up front can make the whole process go easier. The debt you carry and your repayment history can greatly impact how large a home loan you can qualify for. If you were contemplating both a car and home purchase, it would behoove you to purchase the home first. Typically a house payment will not affect your ability to get a car loan, but a car loan can often limit the amount of home loan you can qualify for.

It is important that you take care of your credit at all times. Late payments on credit cards, installment loans, car, boat, or home payments will affect your ability to borrow for these things again and impact your ability to get the best interest rate. If the lender sees that you have a chronic problem paying your bills, it will be difficult to convince him that you will mend your ways as soon as he makes you this loan, especially if you have made a habit of being late on a home loan.

Occasionally, there may be something on your credit report that is an error. How can this be removed? You can get errors removed yourself by contacting the credit reporting company. They can give you direction on getting it removed from the credit file permanently. It is not necessary for you to hire someone to do this for you. There are advertisements for 'credit clinics' that promise to 'clean up' credit. If the late payments, judgments, or bankruptcies are yours, they cannot be removed permanently. The government is cracking down on these credit clinics, as they tend to lead customers to think they can erase bad credit. Don't add to your debt load by using these credit clinics. If there are inaccuracies in your report, you can get them taken care of yourself.

Sometimes people worry that they have had no credit and that this may impact their ability to get a home loan. This by itself should not affect a purchaser's ability to buy. Usually the purchaser has been renting somewhere. The landlord and utility companies can serve as credit references. Therefore, it is important to pay your rent and utility bills on time.

Also, lenders cannot discriminate based on the age of the purchaser. If a well-qualified person wants to take out a 30-year loan, and they are 90 years old, the lender cannot deny the loan based on age.

A little forethought about your purchases and responsible repayment history can make the purchase of a home or investment in the New Year a reality.

Copyright Olive 2004