As I’m sure everyone has heard, right now in the Phoenix Valley it is a great time to buy a house. Whether or not you are able to make this commitment right now, you can still get yourself ready for when the time comes you can purchase.
1. Check your credit now! If you haven’t recently checked your credit, right now would be a great time to do so. There are plenty of sites that offer free credit reports for you but make sure you check with all 3 bureau’s (Equifax, TransUnion and Experian). Get a copy of your report and check for inaccuracies and surprises. You want to make sure there are no surprise accounts that you are not familiar with and you want to make sure everything that is being reported is correct.
This is especially important for anyone who has gone through a short sale. It is not that uncommon for your short sale to be reported as either a foreclosure or still being reported as unpaid every month even after your short sale has closed.
2. Start saving! While there are programs available to help with down payment assistance, it is often encouraged to put as much down as possible. There are two main reasons for this… the more you put down means the less you finance, which lowers your monthly payment. Also, typically if you put less than 20% down on a home you will have to obtain Private Mortgage Insurance, which will increase your monthly payment.
3. Keep your credit card balances UNDER your limit! If your credit card balance is above your credit limit due to finance charges or anything else, it will impact your credit. Make sure your limit isn’t exceeded and if it is, pay it down immediately!
4. Make your payments on time every month! Every time you make a late payment it affects your credit but it also shows instability to a mortgage lender. Set everything up on auto pay if you can.
5. Locate all your financial documents! When you are applying for a mortgage you will need to provide bank statements, tax returns, pay stubs, proof of payoff on recent loans and other financial documents. Keep these all in a safe place so they are easily accessible when the time comes.
6. Determine where your down payment will come from! If you are going to be withdrawing your down payment from an investment, retirement account or other source, check with the financial institution to find out the withdrawal policy. You may have a holding period, early withdrawal fees or other stipulations to obtain your money.
7. Meet with a mortgage lender at least 3-6 months before you think you will be ready to buy! Even if you aren’t quite ready to buy, most mortgage lenders will be willing to meet you with. They can run your credit and let you know if there is anything you can do to improve your credit score. Also, they can discuss your options to ensure you are fully prepared for the mortgage process when the time comes.
8. Don’t change careers! Mortgage lenders want to see stability in your career so don’t change careers prior to (or during) the mortgage application process. Most lenders will allow you to change jobs as long as it is in the same field but double check with your mortgage lender to be safe.
9. Don’t make any large purchases! If you are planning on buying a house don’t go out and purchase a new car, boat or other item if it’s not needed. Your mortgage lender will be checking your debt to income ratio to make sure you don’t already have too much debt and unnecessary purchases can hurt your income to debt ratio.
10. Talk to a qualified Realtor! Even if you aren’t ready to buy a good Realtor can help you understand the home buying process. You also might want to determine which areas you are interested in so you can see what home prices are in that area.
If you would like to talk to a great mortgage lender let me know. I have a few great lenders that I work with and would highly recommend!