New Year’s Resolutions for First-time Homebuyers
It’s the time of year when we’re all focusing on fresh beginnings and setting goals for the future. Is buying a home on your resolution list for the New Year? There is so much information floating around that many first-time buyers may feel inundated with statistics and nervous about taking the leap.
Here’s what we know for sure. No matter where you are in the process, there are things that you can work in immediately to help make your goal a reality.
1. Pay down debt.
Not only does the amount of debt impact your credit score, it also may play a role in the amount of the mortgage loan and loan product for which you may qualify. Ideally you want a debt to income ratio of 43 percent or lower, which is all of your monthly debt payments divided by your gross monthly income.
2. Improve your credit score.
Your credit score may significantly affect whether you will qualify for a mortgage. It also may affect other aspects of your loan, which could ultimately determine how much you will pay for your home, such as the amount of your down payment and the loan programs for which you may qualify. Credit scores can change every month, and you should monitor yours and review your credit history on each of the three major credit bureaus: TransUnion, Experian, and Equifax.
3. Start saving for your down payment.
Unless you have a special loan that requires no down payment, a down payment assistance program, etc., you will need enough saved to cover a down payment and closing costs. The amount of the down payment can vary and is typically between 3% to 20% of the purchase price.
4. Hold off on large purchases.
Even if you have enough saved for your down payment, sit tight. We recommend that you avoid incurring additional debt until after you’ve closed on a home. This way you’ll avoid any negative impact on your credit score and debt to income ratio that may occur with additional debt.
5. Pause the job search.
If buying a new home is your priority this year, leaving your job during the home buying process could affect a loan approval. Keep in mind that most loan products have a work history/employment guideline that must be complied with in order to be approved for a loan.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All loans are subject to loan guidelines and approval.