Ready to buy a house? Before you shop for a home, consider shopping around for…
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You’ve decided it’s time to purchase a home. It’s an exciting time, but the process requires preparation. When applying for a mortgage, you want to be in the best spot possible to ensure the process goes smoothly and you qualify for what you deserve.
However, a few financial and personal decisions can affect you for the worse if you make them prior to applying. If you are going to enter the market in the near future, avoid these actions at least 6 months prior. Although, the longer you can follow these rules before you apply, the better.
Do Not Open or Close Credit Cards
If you have too many credit inquiries over a short amount of time, it can hurt your credit score. Even if your credit is impeccable, don’t apply for any new cards or close any accounts in the 3-6 month window before applying for a mortgage (and during the process). Unused lines of credit can be viewed as similar to unsecured loans.
Even if that Target Red Card is tempting you at checkout, just say no. The savings aren’t worth it right now. It may seem counterintuitive to avoid closing a credit card when preparing to buy a home, but don’t do it. Closing a card can raise your debt to credit ratio. You’re better off making some small purchases with that card and paying them off to show a good history of credit.
Don’t Be Late on Bills
Just being a few days late on a bill can send up a red flag in your credit history. If you’re in a bind, call the institution ahead of time to see what can be done to avoid any dings to your credit, or establish a different payment schedule. If you tend to be forgetful, now is the time to set up automatic payments and calendar reminders. You don’t want to have your credit score suffer over something this small.
Watch Your Debt-to-Income Ratio
Your debt-to-income ratio is the largest factor lenders look at when considering what amount you qualify for. Don’t max out your credit cards or get a new loan, no matter how small. Also, this is not the time to make a job switch and show any instability in your income.
No Large Purchases
Be it a car or washing machine, don’t make any large purchases during this time. If you have to take out a loan or use your credit card for a large purchase, this is something a lender will notice. Even if you’re feeling financially confident with all the savings you’ve been doing to prepare for a home loan, and perhaps your change of location requires a different or additional vehicle, don’t make that purchase. Do whatever you can to defer the purchase to a later time when your debt-to-income ratio can handle the change.
Don’t Cosign on a Loan
Cosigned debt has the possibility of becoming your debt. If the person you are trying to help meets unforeseen circumstances and defaults, it will hurt your credit score significantly.
No Large Deposits When Applying for a Mortgage
In this market, a lot of people get help from family members in accruing their down payment. If you’re going this route, you want to have the amount in your bank account long before you begin the house-hunting process. This goes for any sudden deposit of a large amount. Lenders are looking for stability, and large amounts of money moving into or between accounts can give lenders pause.
We’re Here to Help
A lot goes into applying for a mortgage, and that’s why we are here to help. We want to get you the best loan possible that fits you and your hopes for the future. Maybe you’re uncertain about what to do next, reach out to us at 844-6-VA-LOAN, and we will guide you to the next best step.