BUDGETING FOR YOUR REMODELING
What Lenders Want to Know
Regardless of the type of financing you apply for, lenders must have confidence in your ability to repay the loan. They will assess your credit worthiness by examining three primary areas:
- Income
- Debt and other financial obligations
- Credit History
Employment and Income Verification
Plan to provide information about your employment, including tax returns or W-2 forms for recent years and your most recent pay stub. If you are self-employed, you will need to show a year-to-date, profit-and-loss statement; a balance sheet signed by an accountant; and signed business and personal tax returns from the past two years.
Recent Bank Statements
Lenders usually require a list of your bank account numbers, bank addresses, and approximate balances for each of your checking and savings accounts.
Investments
You must provide a description of any stocks, bonds, and mutual funds you own, along with the number of shares or face value, the name in which they are registered, and their market value.
Debts and Fixed Expenses
Supply a detailed list of your creditors, including credit card accounts, car loans, student loans, child-support payments, and alimony, all with approximate balances.
Reports from Credit Bureaus
Expect your lender to order a copy of your credit report from one of the three credit-reporting agencies to verify your personal credit history, income, and employment figures.
Consult Your Tax Planner
The best person to help you determine the tax consequences of your remodeling project is your accountant, tax planner, or financial advisor. Ask for tax recommendations early in the planning process so you can determine the wisest course of action.
Consider Resale Value and Cost Versus Value
As a rule of thumb, you should avoid over improving your home. You may really want to build a turreted room with a spiral staircase, but would it be a wise investment? Which remodeling projects net the greatest return? Consult a real estate agent, appraiser, contractor about which improvements will increase your home’s resale value, which could help most to sell the house later, and which are typical of the neighborhood.
