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Keeping your finances solid for a new home purchase doesn’t just mean having a big down payment or good credit history; there are other factors that affect your ability to get a mortgage. Zillow’s blog Porchlight highlights a few, you read more about each one here.
Homebuyers should strive to maintain a stable employment history. Lenders typically prefer borrowers who have a consistent source of income and a stable job history. Changing jobs frequently can raise concerns about income stability, making it harder to qualify for a mortgage. It's advisable to stay with a steady job for at least two years before applying for a home loan.
Assess your monthly expenses and consider reducing or eliminating unnecessary subscription services. While these services may seem insignificant, their cumulative cost can impact one's ability to save for a down payment or afford a higher mortgage payment. By cutting back on non-essential subscriptions, homebuyers can redirect those funds towards their savings goals.
Avoid Job Hopping:
Homebuyers should strive to maintain a stable employment history. Lenders typically prefer borrowers who have a consistent source of income and a stable job history. Changing jobs frequently can raise concerns about income stability, making it harder to qualify for a mortgage. It's advisable to stay with a steady job for at least two years before applying for a home loan.
Limit Monthly Subscription Services:
Assess your monthly expenses and consider reducing or eliminating unnecessary subscription services. While these services may seem insignificant, their cumulative cost can impact one's ability to save for a down payment or afford a higher mortgage payment. By cutting back on non-essential subscriptions, homebuyers can redirect those funds towards their savings goals.
Build a Solid Credit History:
A strong credit history is vital for obtaining favorable mortgage terms. Homebuyers should focus on building and maintaining good credit by paying bills on time, avoiding late payments, and keeping credit card balances low. Consistent and responsible credit behavior over time helps establish a solid credit history, demonstrating to lenders that the borrower is a reliable candidate for a mortgage.Check Your Credit:
Before applying for a mortgage, it's crucial to review your credit report and check for any errors or inaccuracies. Obtaining a free credit report from each of the major credit bureaus (Equifax, Experian, and TransUnion) allows you to identify and address any issues that might negatively affect your credit score. Correcting errors and addressing any outstanding debts or delinquencies can help improve your creditworthiness and increase your chances of getting approved for a mortgage.Avoid Large Purchases:
Homebuyers should be cautious about making significant purchases, such as buying a new car or expensive furniture, before applying for a mortgage. Taking on additional debt or increasing monthly payments can affect your debt-to-income ratio, which is an important factor that lenders consider when assessing your ability to repay a loan. To maintain a healthy financial profile, it's advisable to postpone major purchases until after the mortgage is secured. Focus on saving for a down payment and reducing existing debts instead.
By following these steps, home buyers can position themselves for a smoother home buying process, increase their chances of mortgage approval, and ensure a stronger financial foundation for home ownership.
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