Thinking of buying a home in 2022? You’ll want to keep your financial resume in check, so we’ve compiled five New Year’s resolutions that can help you do just that!
1. Avoid bouncing jobs
Your employment history and annual income are two of the biggest factors that lenders will look for when evaluating your mortgage application. A new job may sound appealing, and it may be your best career option, but what if you plan to buy a home in the new year? Keep in mind that bouncing from job to job can be a big red flag to some underwriters — especially if you’re moving to a completely different industry.
A steady job history with few or no gaps over the past two years is going to be ideal for purchasing a home because it helps lenders more easily forecast your future income.
If you recently got a new job and are currently home shopping for 2022, let your lender know as soon as possible. It doesn’t mean you won’t qualify for a mortgage — just be prepared to show extra documentation.
2. Watch your monthly subscriptions
Monthly subscription services (of any kind) are convenient, but they can add up big time. Even if you pay off your credit card every month, you could be docked for high credit utilization if your credit report is pulled mid-cycle.
If you’re thinking of buying a home in 2022, consider keeping your monthly subscription services to an absolute minimum.
3. Build a solid credit history
You probably expected this tip to be first! One of the first things a lender will look at is your credit history. Lenders prefer borrowers who have a history of paying off credit cards and other debts on time — because it signals that you’re a responsible borrower and less of a risk to them.
If you don’t have credit, securing a home loan may be significantly more challenging and time-consuming, but not impossible. Records of paying rent and utilities on time, as well as student loan debt or cell phone bills, can help show a potential lender that you have a history of managing monthly payments.
4. Keep your credit in check
Your overall credit score can also have a significant impact on your ability to buy a home. Having a low credit score can negatively affect how much money a lender is willing to loan you, as well as your interest rate.
Having a few percentage point differences in an interest rate can cost you thousands over the long run. We recommend monitoring your credit closely, especially for fraudulent activity, to prevent any surprises that could delay your loan application process.
If you’re unsure of your credit score, many financial websites offer credit score monitoring, or you can get a full credit report once a year.
5. Avoid large purchases
Avoid taking on large amounts of debt — whether it’s buying a car or planning a large vacation — before you’re gearing up to buy a house. This is advisable even if you’re already pre-approved.
How much money you make compared to how much debt you have (your debt-to-income ratio), can significantly affect how much money a lender is willing to give you. Keeping debts to a minimum can help make the home-buying process go a lot more smoothly.
Just like proofreading your resume before you apply for a job, cleaning up your financial resume can help improve your chances of buying a home.