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If 2021 is the year you’re thinking of buying a home, good for you! There’s no time like the present, especially with current low interest rates.
There are some things you can do now to help ensure that you’re ready to buy a home when the time comes. A little preparedness can really help, especially in a market as hot as ours is. So, here are some new year’s resolutions if you want to buy a home this year.
1. Download Our Free Homebuyer Roadmap
How are you going to get where you want to be if you don’t know how to get there? Buying a home is a complicated process, and it helps to know what steps happen along the way and approximately when they happen.
Go here to download our free roadmap to buying a home. Inside, you’ll learn about:
- The life of an escrow account
- Closing costs
- The benefits of buying over renting
- SO much more!
If you’re not sure what buying a home in 2021 might look like, this is the perfect place to go to get started on the process. And of course, we’re always here to answer any questions you have.
2. Check Your Credit Strategically
It’s really smart to check your credit to see where things stand. Go to annualcreditreport.com, where you can request a free credit report from each of the three major credit bureaus—TransUnion, Experian, and Equifax—once a year. Look them over carefully for any mistakes, and if you find any, be sure to report them to get them fixed.
On the flip slide, you shouldn’t have any potential lenders actually check your credit until you’re close to being ready to buy. Too many hard credit inquiries in a short time span can really ding your credit. If you’re rate shopping (which you should definitely do), all similar inquiries in a 30-day period count as one.
Also, just a note here that checking your own credit does not harm your score in any way.
3. Understand Credit Factors
It’s one thing to check your credit. It’s another thing altogether to understand your credit and how credit factors impact your ability to get a loan. Here’s a quick video from Aaron on what lenders are looking for when they review your credit.
Good credit greatly increases your odds of getting a loan, and the better your credit, the better the interest rate for the loan is likely to be.
The main factors that impact your credit are:
- Payment history
- Credit utilization ratio
- Type, age, and number of credit accounts
- Total debt
- Any bankruptcies or foreclosures
- Recent credit accounts opened
- Number of inquiries on your credit report
4. Avoid Job Hopping
If you’re thinking of buying a home in 2021, try to avoid a mid-life crisis! A complete career change can make it harder to get a mortgage because lenders want to see a stable income in your future.
However, this can be very complicated, so if you’re not sure what a job change might mean for your mortgage, be sure to ask us what the options are. There is no one-size-fits-all answer here.
5. Avoid Large Purchases
Do you know what is the very worst? When a loan is just about ready to close and the borrower buys a brand-new car and takes out a huge loan for it. That’s because lenders use a ratio called debt-to-income, or DTI, to compare your income to your monthly debt payment load. If your large purchase puts your DTI over the threshold, the loan may not close.
If you can, avoid any large purchases before you apply for a home loan, which will mean that your DTI is lower. That’s always a good thing. Once you’re approved for the loan, make sure to hold off on any large credit purchases until the loan has closed.
6. Make a Savings Plan
There are ways to lessen the cost of a home with low down payment loans, gifted funds, and more, but the truth is that buying a home costs money. You’ll want to save up money for a down payment and closing costs, and it’s also smart to have some cash reserves for an emergency fund.
Make sure to download our free Digs app to help get your savings plan together. Just go here to get started! It’s quick and easy and will put you on the road to your dream home.
7. Get Your Financial Documents in Order
When you get a mortgage, you need a TON of financial documents. These include:
- ID and Social Security number
- Pay stubs from the last 30 days
- W-2s or I-9s from the past 2 years
- Proof of any other income
- Federal tax returns from the past 2 years
- Bank statements from the past 60 to 90 days
Here’s a pro tip: you’ll need a lot of this information as you do your taxes for the year, so why not organize this paperwork at the same time? Then, when you’re ready to get pre-approved, it’ll be ready to go and you won’t have to round it up again.
8. Get Pre-approved
Speaking of getting pre-approved, that’s the final thing on our list of new year’s resolutions if you want to buy a home this year.
When you get pre-approved, your lender goes through your financial documents and makes sure you’re able to get a loan. While it’s not a commitment to lend, a pre-approval shows sellers in a competitive market that a lender believes you can purchase a home. In a competitive market like ours, that can make all the difference.
If you have questions or would like to chat about your home-buying journey, we are always just a phone call or text away. Feel free to reach out at email@example.com or 916-465-6639. And if you’re ready to apply now, click here to start our online application.