10 Ways to Stay on the Up-and-Up When Buying a Home

You just decided to buy a home – it’s very exciting!  But now you need to finance it.  Even if you have stellar credit, you will want to keep your finances in order until you close the deal.  Lenders need to know that you are responsible with your money.
Here are 10 ways to ease those questioning minds of potential lenders:
1)    Stay in your current job.
Lenders love to see applicants that are receiving a steady income, especially in a position that’s been held with the same company for a length of time.
2)    Keep your current bank.
When your banking history reflects stability – you reflect stability.
3)    Be honest on your loan application.
This is a no-brainer, but some people still do it.  Falsifying any information is fraud and can land you a ton of problems.  Just be truthful and report any and all debts or liabilities.
4)    Allow the money in your bank account to, “Season.”
Seasoning is when money in your account, “Sits,” there for a little while.  Typically about two months.  This reflects positively for you because it shows that money won’t be disappearing into the ether.
5)    Stay clear of big ticket items.
Purchasing large items such as furniture or a vehicle increases your debt-to-income ratio and may raise some concerns.  It’s best to wait on these types of purchases.
6)    Make consistent payments each month on your credit cards.
Consistent payments on your credit cards are a great way to show that you are aware of outstanding debts and that you are responsible in repaying them.  This translates directly to whether or not your lender believes you will make consistent payments on your mortgage.
7)    Pay off your car if you’re able.
Items that cost a lot increase your debt-to-income ratio and a great way to bring that down is to pay off these big ticket items.  Paying off your car or as much of it as you can before you purchase and finance a home is a great way to show that you’re responsible with your finances.
8)    Don’t co-sign a loan under any circumstance.
Co-signing a loan will increase your debt-to-income ratio, even if you are not the one making payments on the loan.  Steer clear of it!
9)    Don’t apply for new credit cards or prompt new credit inquiries.
Lenders will see you as a higher risk if you are looking for new forms of credit.  However, if you have queries on your credit report that are related to your mortgage search, it won’t usually affect your credit score because lenders assume that you are rate-shopping.  Be careful about opening new credit accounts, especially within short time periods of one another – it could raise your risk factor and your credit could take a hit.
10)    Remember:  Closing costs!  
Financing a loan means there will be closing costs, some of which you may be responsible for.  Make sure that you have enough to cover any associated costs.

For more ideas and tips visit Realtor.com.

By Linda Moore

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