- A firm decision to do or not to do something.
- The action of solving a problem, dispute or contentious matter.
As we head into the second week of the new year it is not to late to make or revise resolutions. It seems money, fitness and work are always at the top of the list when we think about making our resolutions…but this year, let us try something a little different, let us think about “home”, do you want to buy a home, spend more time at home, renovate at home?
Your home is one of the single most valuable material possessions you will ever own, after all it is where you LIVE your LIFE! 🙂 So let 2016 be the year we resolve to buy that new home, spend more time at home or do those pesky projects to make it feel more like home.
Let’s get the ball rolling for those looking to buy a home:
How’s your credit?
While you could just pop into any financial institution to have a credit check done, this counts as a “hard inquiry” which actually brings your credit score down. Try a free online site such as www.CreditKarma.com, though it may not show everything, it will give you a pretty good estimate of your TransUnion and Equifax scores, allow you to see past due accounts, current accounts and credit inquiries.
Paying off past due accounts and disputing false claims with creditors should be the first task to tackle, once these have been removed from your account, you will see your credit score slowly climb.
The next step should be lowering your debt to income ratio, most banks will not consider a home loan unless your ratio is below 50%. In basic terms, if you make $1,000/month and your payments (credit card, car, loans etc.) total more than $500, you have over a 50% ratio.
Take a look at these payments, credit cards are the easiest to eliminate and keep at a low balance first, you don’t need to close out the account because the longer the account is open and in good standing the more it adds to your score. Second in line should be any low balance personal or car loans that can be paid down or paid off, keep in mind just making regular payments on time will report your account in good standing and that is ok, but if you are trying to achieve a lower debt ratio these are a few steps to take first. Try evaluating your current debt and making a master plan with one of these inexpensive printable planners from: One Beautiful Home.
Lastly, looking to buy a new vehicle, taking out a new credit card or applying for a new loan will more than likely result in a hard inquiry on your credit report. The goal is to keep these hard inquiries to a minimum as they do bring your score down and show the bank you are looking to extend your credit.
Taking these efforts before applying for your mortgage can really set you up for a positive home buying experience, possibly increase your approval amount and lower your interest rate.
NO CREDIT? No need to go out and over do it, most banks will take into consideration open/past accounts that do not report to the credit bureau such as the electric company, landlord rental history, phone/cable companies and owner financed loans. Additionally, applying for a credit card, using at least once a month for activity and paying off before the due date will establish your ability to make regular monthly payments without default.
Additional tips on home buying, home life and home renovation to come; please subscribe!