If you plan on 2019 being the year you buy a home, there are some crucial steps you need to take now. Even if you don’t plan to buy a home until the middle or end of the year, you have to start now. Planning now will help you get the best terms and costs for your new mortgage.
Keep reading to see what you can do to set yourself up for a stress-free mortgage process for 2019.
Look at Your Credit
Your credit is one of the first things lenders are going to look at when you apply for a mortgage. It’s their first impression of you. It’s probably best if that first impression is a good one.
Right now, you can get a free copy of your credit report from each of the three credit bureaus. Just head here to get your copy from each of them. Once you have the report, scour through them. You’ll want to look for any of the following:
- Negative information that does belong to you
- Incorrect information that doesn’t belong to you
- Issues that you can fix now or in the future
- Any accounts that you have overextended
The next step is to fix anything you can fix right now. For instance, any information that doesn’t belong to you should be removed. You’ll have to provide the credit bureau with a written request as well as proof that the account doesn’t belong to you. The credit bureau will then conduct their own investigation and remove the information if they find that it is incorrect.
Any information that is correct, but is negative, you can work on as well. For example, do you have a late payment on a car loan or credit card? Get current on the debt as fast as you can. Then make sure that you stay current on that payment as well as any other payments moving forward. Lenders like to see at least a 12-month history of on-time payments.
Finally, pay down any large debts that loom over your head. Any credit cards that have a balance of more than 30% of your total credit balance should be paid down. Balances higher than 30% can really drag your credit score down.
Start Saving Money
If you haven’t’ already, you need to start saving money for your down payment. Now is the best time to create a plan. First, assess how much you have saved already. Then determine how much you can budget to put in your savings each month.
You won’t need a 20% down payment in most cases, as many people assume. But you will need some type of down payment unless you are eligible for a VA or USDA loan. FHA loans require at least a 3.5% down payment and conventional loans require at least a 5% down payment.
If you don’t think you’ll have enough for the down payment, think about any gift funds you may be able to use. Will your parents help you with the down payment? Does your employer offer any type of assistance? If so, you’ll need to start getting your ducks in a row as it pertains to the gift so that the lender can verify the funds and that the money is a gift and not a loan that you must repay.
Achieve Employment Stability
You shouldn’t plan to change jobs within the next year. Lenders like to see job stability, which technically means 2 years at the same job. Many lenders do cut some slack in this department, accepting applicants that have been at the same job for one year rather than two.
If you change jobs now, you only put your ability for loan approval at risk. Instead, try to stay at the same job. If it’s nearly impossible to do so, at the very least, change jobs within the same industry. If you keep the same job type and a similar salary too, it can even increase your chances of approval.
Talk to a Lender
While it’s probably too early to get pre-approved quite yet, you can at least talk to a lender to see where you stand. Let the lender look at your income, assets, and your estimated credit score. This way they can tell you what program you may qualify for and what you’ll need to do between now and when you buy the home to get approved.
Pre-approvals are only good for 60-90 days so unless you plan to buy a home at the start of the new year, you’ll want to wait to go that far. The lender doesn’t necessarily have to pull your credit now to tell you what you may qualify for, as long as you have a good idea of where you stand. Today, it’s easy to get your hands on an estimated credit score from your bank or credit card company. They both usually offer free credit score services. Between your estimated score and your free credit report from above, you can give a lender a good idea of where you stand.
Taking these proactive steps now can help you get the loan you need to buy a home in 2019. Just keep in mind that lenders like reliability and stability. This pertains to any aspect of your loan. If you have to question something you might do between now and then, it’s probably best not to just to keep your chances of approval high.