Are you thinking of purchasing a home this year? We have gathered five New Year’s resolutions that can support you to keep your financial resume in perfect order.
1) Avoid Job Hopping
Employment income and history are two of the most significant factors money lenders observe when assessing a mortgage application. A new job might be a great career move, but if you plan to purchase a house in the new year, understand that job-hopping can be a red flag to some underwriters — particularly if you are moving to a different industry.
Constant job history and few or no gaps in work over the past two years are considered as ideal, as it helps money lenders quite easily forecast your future income.
If you manage to get a new job while house shopping, let your money lender know as soon as possible, it does not mean you will not qualify for a mortgage — just be well ready to show extra documentation.
If you are moving from an hourly or commissioned job to one that is salaried with equal or more significant compensation, it might help your application. Money Lenders often prefer borrowers to have steady and predictable paychecks.
2. Limit Monthly Subscription Services
Monthly subscription services are undoubtedly convenient, but they can add up. Although, if you pay off your credit card each month, you could be dinged for high credit utilization, if your credit report is drawn mid-cycle. If you are thinking of purchasing a home this year, always consider keeping your monthly subscription services to a minimum.
3. Build a Solid Credit History
One of the first things a money lender will look at is your credit history. Money Lenders prefer borrowers who have a history of paying off credit cards and other debts within time — because it indicates that you are a responsible borrower and quite less of a risk.
If you do not have credit, obtaining a house loan might be significantly challenging and time-consuming, but not impossible. Records of paying utilities and rent on time, as well as cell phone bills or student loan debt, can help show a potential money lender that you have a history of managing monthly payments.
4. Check your Credit
Your credit score can have a substantial influence on your ability to purchase a house. A weak credit score can negatively influence how much money the lender is ready to provide you for a loan, as well as your interest rate.
However, a few percentage point differences in an interest rate might cost you thousands over the life of a loan. Observe your credit carefully, particularly for fraudulent activity, to prevent any surprises that could delay the loan application process.
If you are uncertain of your credit score, various financial websites provide credit score monitoring, or you can get a complete credit report once a year.
5. Avoid Large Purchases
Avoid taking on vast amounts of debt — whether it is planning a large vacation or buying a car — before purchasing a house. This is wise enough, even if you are already preapproved.
Your debt-to-income ratio, or how much cash you make compared to how much debt you have, can particularly affect the amount a money lender is ready to give you. Having debts to a minimum can help make the house-buying process go a lot more smoothly.
Just like the way you proofread your resume before you apply for a job, cleaning up your financial resume can help increase your chances of purchasing a house.
Take benefit of online tools and resources, for example, affordability calculator, which can help you determine how much house you can afford.