10 practical home-buying tips to write home about
Thinking of purchasing your first home? Or finding a new house with more space? With inflation on the rise, market conditions are evolving which could impact your home purchasing decisions.
Interest rates are likely to increase which, in turn, can affect future monthly payments. So you may want to try to lock in current rates as soon as possible to keep your payments as low as possible.
Mortgage loan limits are rising to reflect higher housing prices in the region. That means you may gain extra borrowing power, if you qualify.
How to Prepare for a Best Outcome
Before you sit down with a lender, make sure your personal financial situation is in tip-top shape. Here are some proven tips that can help you put your best foot forward—and make the entire mortgage process easier.
1. Save regularly.
Lenders like to see that you’re conscientious about saving. They want to know you have enough money for closing costs, reserves and a cushion to cover future debt payments.
2. Try to avoid big purchases.
While you’re in the process of buying a home, try not to take on another large debt, like buying a car or taking a dream vacation. Buying a home is perhaps the biggest investment of your life, so hold off major spending until after your closing is final.
3. Carefully consider career moves.
Lenders want to work with borrowers who have at least a two-year history in one job. If you quit, change jobs, or become self-employed, you’ll eliminate that history—even if you’re getting a promotion or salary increase.
4. Use credit cards conservatively.
Shopping for a mortgage is the wrong time to apply for new credit cards. Each time you do, it creates a hit on your credit report. Some people get so excited about furnishing their new home, they start buying furniture or appliances and rack up new credit card debt, which ultimately limits how much “house” you can afford.
5. Be diligent about making credit card payments by the due date.
Remember, a May 15th deadline means May 15th. If you miss a payment and double up on June 15th, you’re still 30 days late.
6. Know the facts about credit scores.
The credit score you pull is not the one lenders will use. The FICO score you see is generic. Lenders use more specific industry credit scores that are customized for the level and type of debt a consumer is taking on.
7. Check your credit reports for errors.
They’re far more common than you might think. In fact, a recent Consumer Reports survey revealed that more than one-third or 34 percent of consumers found errors in their credit file— mistakes that makes them seem like a bigger risk than they actually are.
It’s also a good idea to check your credit reports frequently at annualcreditreport.com. Although you can do this for free, only 38 percent of consumers aged 18-24 had checked theirs as of January 2020.
8. Understand the implications of co-signing a loan.
You may be trying to help your boyfriend, girlfriend, daughter, son, best friend, fiancé (you fill in the blank). Even though they make the payments, you’ve created an additional debt exposure for yourself which appears on your credit report. Plus, if they default, you’re on the hook. It will affect your credit score and potentially hurt your chances for the mortgage approval you want.
9. Be up front about your obligations.
When you apply for a mortgage, don’t omit debts or liabilities. Remember, lenders will require a credit report and tax returns. You don’t want your lender to think you are trying to hide something AND you want to know how much you really qualify for.
10. Sign up for a first-time homebuyer education class.
You’ll learn how credit scoring works, the importance of a home inspection, mortgage-shopping insights, costs you may incur and much more. Even if you’ve bought a home before, today’s marketplace may be much different. These classes are often free or offered at a minimal charge - and they get you up to speed fast. Find a local class at hud.gov.
There’s plenty of information online about how you can buy a home with low down payments, little savings, nontraditional credit, low credit scores, and minimal documentation. To avoid the confusion, we recommend that you connect with a Webster Banker who knows your territory: the neighborhoods where you’re looking to move, possible down payment assistance programs (DPA), various mortgage options available, and the steps to get you over the threshold faster.
At Webster, our mortgage bankers can help you compare your options for a home mortgage, help you identify the one that may be right for your unique situation, and help you get the best rate available. Find a mortgage banking partner near you.
The opinions and views in this blog post for informational purposes only and are not intended to provide specific advice or recommendations for any individual. Please consult professional advisors with regard to your individual situation.
All loans are subject to credit approval.