When it comes to determining whether you will qualify for a home loan and under what terms, your income, debt, and credit scores are complementary and critical factors.
If you’ve already begun or are getting ready to start the home loan process, there are a handful of fundamental dos and don’ts to live by. Once you have a grasp on the items below, it might be time to reach out to a home loan specialist to help you navigate the nuances of the lending process.
- Your credit score is more than just a number. It’s what contributes to that number that’s truly important. Thoroughly look through your credit report so you understand your strengths and weaknesses, and be sure to correct any errors you identify.
- If you’ve had credit difficulties in the past, talk to your prospective lender or financial advisor to see if and how long you should wait to apply for a mortgage. Credit problems are penalized less after 12 months.
- Pay off your credit card debt as much as your can prior to applying for a mortgage. Note that this does not mean simply transferring your debt from one card to another, as this practice can actually detract for your credit score.
- Be mindful of your spending after you apply. If you start buying big-ticket items — even things like furniture and appliances for your new home — your debt-to-income ratio will change, which can delay or even destroy the chances of your mortgage going through.
- On par with number four, do not open new lines of credit before applying to a mortgage.
- If you’re going to shop around for mortgage rates, do so within a small window. Multiple credit inquiries from the same type of lender are counted as a single inquiry if they occur within a short timeframe. Those that are spaced out too far, however, can lower your credit score.
When you’re ready to really dive into the home loan process, I would be more than happy to walk you through it.
