Stay on track with your financial resume to improve your home buying odds. Here are a few very important tips that may or may not have crossed your mind.
1.Check your credit card
Your credit score can have a HUGE impact on your ability to buy a home. A low credit score can negatively affect not only how much money a lender is willing to loan you, but also the interest rate. Just a few percentage point differences can add up to thousands over the course of a loan. Simply said, it will cost you. Monitor your credit for fraudulent activity so that there are no surprises that could delay the process of getting a loan. You can get credit score monitoring or a full credit report once a year through many financial websites.
2.Build a solid credit history
Lenders will always look at your credit history so it is important to pay off your credit cards and debts on time. Paying rent, utilities, student loans, or cell phone bills on time can help show a lender that you have a great track record for managing monthly payments. This shows a lender that you are a responsible borrower and less of a risk. For those who don’t have credit, getting approved for a home loan will be much more challenging and time consuming, however, it is not impossible.
3. Avoid changing jobs
The two biggest factors that a lender will look at when evaluating a mortgage application is employment history and income. A new job at some point in your life may seem like a good career move, right? Not if you’re buying a home. Switching up your job can be a red flag to some underwriters. This is especially true if you’re moving to a whole different industry. If you do get a new job while making plans for a home purchase, you should let your lender know right away. Keep in mind, this doesn’t mean that you won’t qualify for a mortgage but you may have to show extra documentation. If you’re changing from an hourly or commission-based pay to salary, that might even help your application. Lenders often prefer borrowers to have stable, predictable pay checks. A steady job history with few or no gaps in employment in the past two years is the ideal situation because it can help lenders forecast your future income.
4.Avoid large purchases
Avoid big purchases such as buying a car or going on vacation, even if you have already been pre-approved for a loan. Your debt-to-income ratio (how much money you make compared to how much debt you have) can greatly affect how much money a lender will loan you. My advice to you is to keep debts to a minimum.
5.Limit monthly subscription services and other credit card transactions
If you are considering buying a home this year, you should also consider keeping your monthly subscription services to a minimum. The truth is, monthly subscriptions are great but they can add up along with other credit card transactions. Even if you pay off your credit card every month, you can possibly be dinged with high credit utilization.
Cleaning up your financial resume can help improve your chances of purchasing a home. As you search for your future home, reach out to our team! We can help you through the process and answer any questions that you have!
Written by: Lisa Truong (email@example.com)