10 Fiscal Fitness Tips for Home Buyers in 2019

Mon, 17 Dec 2018

Mina Minelli, Senior Vice President Shoreline/Central Regional Manager, Home Loans Webster Bank

As we welcome 2019, you may be looking forward to a new home purchase or refinancing your existing mortgage. So being financially fit is more important than ever. Consider this a personal training session, with tips to help you put your best foot forward when approaching a lender.

  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, i.e. buying a car or taking a dream vacation. You’re about to make the biggest investment of your life—a roof over your head.

  3. Carefully consider career moves. Lenders want borrowers who have at least a two-year history in one job. If you change jobs, become self-employed or quit your job, you’ll eliminate that history—even if you’re getting a promotion or your salary will increase.

  4. Be careful with credit cards. Use them conservatively. Also, shopping for a mortgage is the wrong time to take out new cards. Each time you do, it originates a hit on your credit report. Some people get so excited about furnishing their new home, they take out credit cards at five different furniture stores. More credit card debt = less 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. The scores that lenders use are prescription strength! 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, CNBC reports that more than one in 5 consumers have “a potentially material error” in their credit file—a mistake that makes them seem like a bigger risk than they actually are. Check your credit reports at www.annualcreditreport.com.

  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. It shows up on your credit report. Plus, if they default, you’re on the hook. It will ding 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 what 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 www.hud.gov.

Consumers are bombarded with information on how they can be homeowners with low down payments, little savings, nontraditional credit, low credit scores, and minimal documentation. To avoid the confusion, we recommend that you talk with a local lender who knows your territory: the neighborhoods where you’re looking for homes, the state or municipal programs that can help with down payments, and the steps to get you over the threshold faster.

Knowledge is power, so get pumped up now for a smart home purchase—and a financially fit 2019!

The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult your tax advisor regarding your individual situation. All loans and lines of credit are subject to credit approval. The Webster symbol is a registered trademark in the U.S. Webster Bank, N.A. Member FDIC.
© 2018 Webster Financial Corporation. All rights reserved.

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