Sovereign Lending Group’s loan officers are constantly coaching and teaching potential home buyers on financial basics. It is something that we pride ourselves on, and it benefits people whether they use Sovereign Lending Group (SLG) or not to help them buy a home. What do we tell clients, potential or otherwise, about finances, and potentially buying a home?
The first step is to see what’s “coming in.” Income is the money you expect to receive every month, like take-home pay, any other sources of income such as interest, Social Security benefits, pension payments, alimony, child support, workers’ compensation, unemployment, and disability. If your earnings are irregular, like commissions for example, or project work, it’s better to underestimate than overestimate your income.
Next, figure out what is “going out.” Some expenses stay the same from month to month, like your rent or mortgage payment. Others are variable, like food, clothing and gas, or travel. It’s better to over-budget for expenses. Do you have any monthly contributions to savings or retirement you’re already making?
An SLG can help you prepare a simple worksheet, similar to what companies do by having a profit/loss statement, to compare your total expenses to your total income. Sovereign never wants to make a home loan to someone who doesn’t have the ability to repay the loan!
If your income is considerably greater, you may want to increase your savings contributions
to help you reach your down payment goals sooner. If your income is less than your total expenses, you need to examine your expenses for opportunities to cut back to eliminate the
difference. Do you currently have enough savings for 3 to 6 months’ living expenses? If not, it’s good to build up those reserves in addition to saving for a down payment or any other large expenses.
SLG must find out, consider, and document a borrower’s income, assets, employment, credit history and monthly expenses. All lenders cannot just use an introductory or “teaser” rate to figure out if a borrower can repay a loan. For example, if a mortgage has a low interest rate that goes up in later years, the lender must make a reasonable effort to figure out if the borrower can pay the higher interest rate too.
Financial education and literacy are important to Sovereign Lending Group, regardless of whether you buy a home. And we’re here to help, yet another reason to use us rather than just look to the internet when considering financing a home purchase!