If you are looking into buy a new home, your first steps should be to review your credit and get a clear picture of what you can afford. What if you have a few issues that come up that might prohibit you from getting a mortgage? The best thing you can do is to start cleaning up your profile now, and ensuring you don’t make any mistakes that could compound your chances of securing a mortgage inadvertently. Here are five things you should (and shouldn’t) do to clean up your financial picture to hopefully make you eligible for a great mortgage at a low interest rate.
1. Know Your Credit Score so You can Start Improvements
If your credit score isn’t where you think it should be, today is the day you can start improving this. Follow your mortgage broker’s advice or look at online programs that can pinpoint what you need to work on for your specific credit problems that come up in your history. You can then start lowering credit card bills, pay future bills on time, and make sure there aren’t any outliers or discrepancies you need to address and put in some work to get of your record.
2. Buying a Home With a Significant Other or on Your Own
If you’ve done your due-diligence when it comes to your own credit score, you might be in for a rude awakening if your significant other doesn’t have stellar credit. This is where working with a mortgage broker can help you with decision-making strategies. You may need your partner’s income to qualify for a certain type of mortgage or amount you are wishing to borrow, but if you would have better luck at qualifying for a lower rate on your own, you might want to buy a home in your name and leave your significant other off of the loan completely. These decisions can be both emotional and practical at the same time, so be sure to be sensitive when discussing with your partner.
3. Have Your Employment and Salary History Ready
If you’ve worked in the same job and in the same state for the past few years, tracking down your salary and employment history will be easy. If you’ve moved around, work in freelance, or have had multiple employers, you might have to do a little bit of heavy lifting to help your mortgage company get a clear picture of your salary history and job security. These types of verifications can start with copies of your tax returns, but you may need to bring in a third party to review your employment and salary history to deem if you are a risk. A CPA can review and provide a letter on your behalf in some cases.
4. Reviewing Where Your Down Payment Will Come From
While you might have a down payment amount or percentage in mind and where this is coming from, don’t act on moving around money until you review this with your mortgage broker. Transferring or depositing large amounts of money in and out of accounts can raise red flags, so be sure what you are doing won’t affect your chances of approvals down the line. If you will be accepting monetary gifts from family, review with your mortgage consultant first, since how this money is gifted and tax details should be discussed as well.
5. Being Transparent About Recent Large Purchases
If you already have a personal loan out for another reason, be sure to mention this right away to your mortgage broker. This could be for a car, a boat, a motorcycle - anything you have taken a loan out on. This doesn’t mean that you will hurt your chances of getting a mortgage approval, but not mentioning right away could add confusion. Your lender might even recommend your future mortgage package assumes other loans as well, so you that have one lender and not two.
Owning a home can be a great milestone in one’s life. A big part of this often factors in the types of mortgages available to potential buyers. Whether you are hoping to buy a home in the next few months or the next few years, having a clear picture of where you stand financially and what you can do to get your finances in order is key.
You don’t need to do this alone, so contact us to get started and to help you get your mortgage application in the best shape possible.