One of the first items on your new home quest checklist should deal with your finances because getting a mortgage these days can prove to be challenging. We hear about the issue almost daily but what do YOU do to put yourself in the best position to obtain the best mortage? There are some basic steps you should take both to keep your credit looking good and to make sure your financial picture doesn’t change during the mortgage application process.
- The very first step is to find out what your credit score is right now. You may have checked in the past year, but you may not be aware of changes that have posted to your credit report – either correctly or erroneously – that have affected your score. All three major credit bureaus (Equifax, Experian and TransUnion) must provide you with a free report annually so be sure to get a copy from each one. One of the easiest sites I’ve found to work with is AnnualCreditReport.com.
- Do you pay your bills on time? Even 1 or 2 late payments can greatly affect your score so be sure to stay on track with your payments and due dates. Setting up automatic payments is a great method to make sure you don’t ever miss a payment.
- Your income should be steady and reliable. Sounds basic enough but realize that lenders really like to see at least 2 years of employment within the same field and you will need to provide the supporting documentation. If you hold a commission-paying job, you may need even longer time in that field.
- Please don’t go out and buy that new boat (or car or motorcycle or any big ticket item!) as soon as you get loan approval! New loans can adversely affect your credit during the critical period from loan approval thru settlement so hold off until you’ve gone to settlement. And keep in mind, it’s not just new loans – you need to maintain a certain amount of reserves so paying cash for expensive items doesn’t necessarily help. If you must absolutely purchase something, talk to your lender.
- A common theme I have often heard is that buyers want to close old credit cards. That’s not necessarily the best move so talk to your mortgage lender before doing so. The lenders want to see credit history and a reasonable amount of available credit – closing cards can affect both of those.
These are just a few tips to help you purchase your dream home this year. Bankrate.com offers additional advice as well so check out their recent article “12 Mortgage Moves to Buy a Home in 2012”. And of course your lender is one of the best resources to talk to them to get guidance tailored for you.
Happy House Hunting!