I wanted to share some purchase preparation tips that I’ve accumulated over the years to keep in mind once you’ve decided that you are going to buy in the next 6 months.
Cancel shopping sprees
Don’t make any large purchases or do anything that implicates your credit negatively for about four to five months before buying. Banks will be scouring through your accounts to ensure you are financially worthy of a loan. Ignoring this will negatively impact your potential loan amount and rate.
Get your credit in line
Your pre-approval process with a lender will require a credit report to be run. This is a good opportunity to rectify any discrepancies with creditors so when you do have an offer accepted, your final loan approval will no longer include those discrepancies, which will improve your score and get you a better rate. This is the “debt” part of the Debt-to-Income (DTI) ratio that comes into play in getting a loan and dictating what amount.
Most lenders and loan types will require you to pay some % of your loan amount as a down payment, so don’t forget to squirrel away some money for this. If you are getting some help from family or friends, gifting money can be used to help with down payments but will require a gift letter. If you don’t have enough for 20% down, lenders will require you to have mortgage insurance (MI or PMI), which adds to your monthly mortgage payment. There are some loan types out there that will allow you to put as little as 3% down or zero down for those that qualify.
Don’t quit your day job
Proof of and length of employment are core elements in lenders determining your DTI, so now is not the best time to call it quits with your current employer. Stick around until the closing paper work is signed if you can help it.
If you need some more information on any of these items or any other real estate questions, I’m here for you!