New-home financing is tricky these days, and within the log home niche it can be even trickier. Before you wade in, prepare yourself and your financial profile to increase the likelihood of a smooth financing experience. The following article, excerpted from the Log Homes Council, offers 12 steps you can take to organize your finances and help maximize your lender-appeal. Below are just a few – be sure to check out all 12 at the Log Home Council’s website, http://www.loghomes.org/content/you-buy-12-smart-financial-strategies
Use Online Mortgage Calculators
Most lenders have websites that advertise their rates, terms and have mortgage calculators, two of which are www.mortgagecalculator.org and www.mortgage-calc.com. Using these, you can determine a ballpark budget in seconds. To stay accurate and realistic, remember to tally all your assets and liabilities, including your salaries, the value of the land (if you already own it), your investments, any outstanding debt and the value of your existing home if you plan to sell. This important first step will help you set realistic expectations about how much log home you can afford.
Check Your Credit Score
In the new economy and lending environment, your three-digit credit score is hugely important. It will not only determine the interest rate you’ll pay, it will determine whether you get a loan. Check your credit report with the three main credit agencies, but only do it once a year (otherwise it can negatively affect your rating). The Federal agencies that buy mortgages from lenders and resell them to investors (Fannie Mae and Freddie Mac) have indicated to lenders that any consumer with a FICO score above 620 is good rating. If you’re in the high 700s (770+), congratulations are in order because you have earned an A+ rating.
Tactics to Boost Your Credit Score
The average credit score is around 725. What can you do if you are below this number? Credit experts say the way to earn the best credit scores is to have a mix of different credit types, including revolving accounts (credit cards, lines of credit) and installment accounts (auto loans, personal loans and mortgages). Use your revolving credit lightly-but regularly. Signing up for automatic bill payment will also help your score. Being late on your bills by 30 days or more can make your score drop by as much as 100 points. Make sure you pay all your bills on time. If you do have to carry some debt on a card, make sure it’s not more than 30% of your credit limit. That’s a red flag to many banks and lenders.
Look for Lenders with Log Home Experience
With conventional construction, the cost of framing of your home is handled through your contractor’s line of credit with the lumberyard. Log home producers, in contrast, need to be paid before they start cutting logs or upon delivery of the home package to your building site. A lender unfamiliar with log home construction may not offer that as an option.