If you know that you want to buy a house within the next six months, start your financial housekeeping now. Preparing sooner rather than later can increase your opportunity to earn a lower interest rate, which can lead to thousands of dollars in savings over the life of your loan. Read on to learn how you can impact your ability to get a mortgage for a first home in the next six months.
Before you start browsing real estate listings, talk to Mars Bank to be pre-approved for what you are able to afford. After reviewing information about your finances, including income, assets, and debt, Mars Bank will produce a pre-approval letter, which communicates to sellers and real estate agents how large a mortgage for which you can be approved. This helps provide guidance as to your target price range and what neighborhoods you can buy in. We will also work with you to determine what mortgage terms and payment size you are comfortable with.
Checking your credit is one the first steps you want to take in buying a home. Even if you are confident that you have good credit, undiscovered errors in your report could drag down your score. This could result in a higher interest rate on your mortgage. You are entitled to a free copy of your credit report once a year from each of the three major credit reporting companies – Equifax, Experian, and Transunion. If you find any errors in the payment history or status of your credit accounts, follow the instructions for correcting the error.
Boosting your credit score increases your chances of being approved and help you get a lower interest rate on your loan. If you have a lower credit score, it can be more difficult to get a loan. The best offers are available to people with higher credit scores. You can raise your score by making sure you pay your bills on time, having a credit card balance below 30 percent of the available credit, and not opening new or closing existing credit cards. Applying for a new card requires a credit check, which can affect your credit score. Closing a card can lower your credit score by reducing your credit history or making it seem like you are using a larger share of your total credit.
When applying for a loan, Mars Bank reviews your bank and investment statements to confirm you have funds for a downpayment. We recommend tightening your spending in the months leading up to your mortgage application so that you can have as much cash available as possible. With the holidays and other commitments around the corner, you need to keep an eye on how much you are spending if you are planning to buy a home in the spring. Big purchases can be especially harmful if they are made with credit cards or a loan because they add to your debt load. This affects your debt-to-income ratio, causing it to be harder for you to qualify for a mortgage.
At Mars Bank, we want to help you through the exciting process of buying a home in any way that we can. Contact Mars Bank today with any questions or concerns that you might have about getting a loan to buy a home and consider attending a First Time Homebuyer event to walk through the entire mortgage and homebuying process.