1. Analyze Your Credit Report -
If it has been a while since you have seen your credit report, you may be surprised at some of the items that are currently reporting incorrectly. About 90 percent of my clients' credit reports need some work done to them in order to boost their purchasing power, errors range anywhere from old items that have not been removed from the credit report to items that are not even theirs. By thoroughly going through your credit report your loan officer should be able to give you advice and lead you in a direction that positively impacts your credit score and profile up front before sending your loan to underwriting where it will be scrutinized by an underwriter who will want documentation on items contained within the report that should have been taken care of before your loan made it to underwriting, which could delay your closing or void your purchase agreement due to time restraints.
2. Reduce Revolving Credit Card Debt -
Most home buyers carry credit card debt but do not fully understand how credit cards affect their credit scores. There are two main components that reflect your score when it comes to credit cards, the first being your payment history and the second being your outstanding balance. Your payment history is pretty self explanatory, if you make payments on time and are never late your score will be better, if you miss payments your score will suffer and it does take time to rebuild your score after missed payments.
Credit card balances are important for a couple of different reasons; to start with, high balances or balance over 50 percent of the available credit limit will have a negative impact on your credit score. It is important to pay down any credit cards with high balances to boost your home purchasing power. Also, by paying down your high balances, your minimum monthly payment should decrease as well, which will improve your Debt to Income ratios making it easier to qualify for a new home mortgage.
3. Build Reserves -
Whether you have a 401K, IRA, stocks, bonds or just a savings account, building your reserves will show mortgage lenders that you are smart with your money and also have the ability to come up with your down payment for a new home. Typically, you should have your down payment and at least 3 months worth of monthly mortgage payments on a new home stored away in a verifiable account that can be documented, and no money in the mattress will not work.
4. Gift Letter-
A lot of my clients lately have been using gift letters, which is a document used when the borrowers on the loan are given money from a family member or friend to help them with the down payment on their new home. The same rules apply to a gift letter as to coming up with down payment on your own, the money has to be sourced in a verifiable reserve account or from a financial institution where you can prove the money has been for at least 2 months. Additionally, the คอนโด กรุงเทพ gift must not be repayable and there is a letter in which the party that is giving the gift and the party that is receiving the gift need to sign acknowledging that the money is a gift and is not repayable.
5. How Much Can You Afford? -
Before you can determine how much of a home you can afford you will need to have a loan officer analyze your credit and income to determine what mortgage rate you qualify for. If you have cleaned up your credit report and lowered your credit card debt you will qualify for more of a home but that does not mean that you have to purchase a home at the top of your qualifications.
I suggest to my clients to keep their purchase price minimal but to find a house that they can enjoy for years to come. If you max out your purchasing power and purchase a home at the top of your qualifications you may be putting yourself in a bad situation if you were to become unemployed or disabled. If there are two borrowers making payment on a home I like to suggest a mortgage in which the lower earning of the borrowers is still able to keep up with payments if something were to happen to the other borrower. If there is just one borrower it is crucial to build up your reserves for a minimum of 6 months to make mortgage payments in case something was to happen.
6. Get Your Paperwork Ready -
To qualify for a mortgage there are certain documents that every new loan must have such as W2s, paystubs, and bank statements for down payment purposes. If you are a self employed borrower there will be additional documents needs such as tax returns and profit and loss statements. However, throughout the process you will likely be asked for additional documents to prove one thing or another such as disputes on your credit report, letter of explanations regarding certain situations. Your loan officer should be able to tell you upfront most of the documents needed and the faster you can get them in the faster you will be able to make it to the closing table. I suggest keeping all income documentation and documentation pertaining to your credit report in one place as this will reduce the stress level of having to find something at the last minute.
Well, those are my 6 steps to help you make your home purchase an easy and hassle free event, but remember that fixing your credit and building your reserves does not happen overnight. The sooner you get started working on your credit and financial profile the faster you are able to boost your home buying power.
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