If you’re thinking of buying a home this year, it’s important your financial resume be as impressive as possible. This means there are a few things you should do first to ensure approval for a mortgage.
Before beginning your dream home search, make sure you’ve addressed all the points below.
1. Stay at Your Current Job
Moving to a new job while trying to buy a home can make it more difficult to qualify for a loan. Lenders like to see that you have a steady flow of income with few or no gaps between employment.
Having said that, changing from an hourly job to a salaried job with a pay increase may help you better qualify for a loan since lenders like to see predictable, steady paychecks.
2. Avoid Monthly Subscription Services
If you’re hoping to buy a house this year, try to keep any monthly subscriptions to a minimum. Even if you pay your balances off each month, these subscriptions add up. If your credit history is pulled mid-cycle, you could be dinged for it.
3. Work on Building a Good Credit History
Your credit history is a major factor in whether you qualify for a loan or not. Lenders like to see that you are responsible enough to handle monthly payments. While it may be more difficult securing a loan if you’ve never had credit, it’s not impossible. A history of paying your rent or utility bills on time will let a lender know you are capable of managing monthly debt.
4. Know Your Credit Score
A low credit score could impact how much a lender is willing to give you as well as how high an interest rate you will have to pay. It’s important to know and monitor your credit report to make sure there is no fraudulent activity that may lower your score.
5. Don’t Make Any Large Purchases
Your debt to income ratio, or the amount of money you make compared to the amount of debt you have, significantly impacts how much a lender is willing to give you. Avoid making any big purchases like buying a car before and during your home buying process to avoid increasing your debt to income ratio.
If you’re planning to buy a home sometime this year, cleaning up your credit and “proofreading” your financial resume can increase your chances of being approved for the home of your dreams.
Do your homework and plan ahead by following the tips above to put yourself in the best possible position to get the home you’ve always dreamed of.