New year, new home? Whip up your financial resume to improve your purchase odds.
Are you thinking of buying a home this year? We’ve compiled five New Year’s resolutions that can help you keep your financial resume in top shape.
1. Avoid work jumping
Employment history and income are two of the biggest factors that lenders look at when evaluating a mortgage application. A new job can be a good career move, but if you’re planning to buy a home in the new year, know that a job can be a red flag for some insurers – especially if you’re moving to another industry.
A consistent work history and few or no shortcomings in employment over the past two years are ideal, as it helps lenders more easily anticipate your future income.
If you get a new job while home shopping, inform your lender as soon as possible. It doesn’t mean you won’t qualify for a mortgage – just prepare yourself to show extra documentation.
If you are transitioning from a part-time or part-time job to someone paid with equal or more compensation, it may help your application. Lenders often prefer borrowers to have steady predictable wages.
2. Limit monthly subscription services
Monthly subscription services are certainly convenient, but they can add up. Even if you pay off your credit card on a monthly basis, you might like high credit if your credit report is pulled midway through.
If you’re thinking of buying a home this year, consider minimizing your monthly subscription services.
3. Build a solid credit history
One of the first things a lender will look at is yours credit history. Lenders prefer borrowers who have a history of paying off credit cards and other debts on time – because it means you’re a responsible borrower and less risky.
If you don’t have credit, securing a home loan can be much more difficult and time consuming, but not impossible. Records of paying rent and services on time, as well as invoices for student loans or cell phones, can help show a potential lender that you have a history of managing monthly payments.
4. Check your credit
Your credit score can have a significant impact on your ability to buy a home. A low credit score can negatively affect how much money a lender is willing to lend you, as well as your interest rate.
Just a few percentage point differences in interest rate can cost you thousands over the life of a loan. Check your credit carefully, especially for fraudulent activity, to avoid surprises that could delay the loan process.
If you are unsure of your credit score, many financial websites offer a credit score check, or you may receive a full credit report once a year.
5. Avoid large purchases
Avoid accepting big debts – whether buying a car or planning a big vacation – before buying a house. This is advisable even if you are already pre-approved.
Vian ratio of debt to income, or how much money you earn compared to how much debt you have, can significantly affect how much money a lender is willing to give you. Keeping debts to a minimum can help make the home buying process go much more smoothly.
As well as proofreading your resume before applying for a job, cleaning up your financial resume can help improve your chances of buying a home.
Take advantage of online tools and resources like ours page blocker, which can help you determine how much home you can afford. Nia mortgage calculator can also provide custom prepayment estimates based on home price and interest rates. And as you search for your future home, take a look at our extensive reviews of lenders and agents who can help you find the best real estate for your needs.
Originally published in January 2018