Clever Alternatives Saving Your Money
1. What is Your FICO Score? Know it…
If you don’t know what your credit score/FICO score is then you need to check your credit score before your lender does. If there are any surprises on your credit score then you should be aware of them before putting in your application. MyFico.com is a great place to find out your FICO score.
2. Got a Down Payment Ready?
A down payment is very important. A lender will be much more interested in your application if you are putting significant money down. Otherwise known as “skin in the game”, a large down payment lets the lender know a couple of things: 1. You do have some money for a down payment. 2. You are willing to put your money out there for the purchase that you are applying for.
Depending on the loan that you are going for, you may get away with 3% or so on a down payment, but if you can then 20% is much better. Talk with a mortgage broker about your options.
3. Don’t Quit Your Job
If you go into your mortgage application without gainful employment then you will probably not get approved. Even if you have a great plan in place for success then you need to wait until you get your loan to make a change like that. A mortgage lender wants to see consistency in numbers and they don’t want to hear stories about your plans.
4. Pay Your Credit Cards and Don’t Apply for New Credit
When a lender checks your credit, what they get is a snapshot of where you are at right at that moment. You want to make sure that the snapshot looks as good as it can. The way to improve it quickly is to pay down your credit cards as much as possible, and don’t apply for new credit. Of course, you are already applying for a mortgage, but we are talking about additional credit beyond that. By paying down your credit cards, you will realize the absolutely fastest way to improve your credit score. I have personally seen my score move up or down as much as 5% just depending on my current credit card debt. You want to go into your mortgage application with your credit looking as good as it can so get those credit cards paid down.
5. Get a Pre-Approval
If you value your time then don’t skip this step. Getting a pre-approval for your mortgage will help everyone involved including you. Whatever you get your pre-approval for will set your price range of what you can afford. When you know what you can afford then your real estate agent will spend time looking at the right houses for you, and you will be able to move faster on a home that you’re interested in. Many mortgage brokers and real estate agents will make sure that you have a pre-approval before moving forward with looking for a home with you.
6. Use Your Head More Than Your Heart
Looking at the carnage in the real estate market over the last 10 years, it is clear that many people made decisions for their mortgage more with their hearts than with their heads. It is great to own a home, but if you purchase a home that you cannot afford then your dream can quickly turn into a nightmare. Make sure that you can afford the home that you are purchasing, and you will be much better off. For example, if your pre-approval tells you that you can purchase a home for $250K, but you are more comfortable with $200K then you need to go with a $200K purchase. Take a look at your income vs monthly expenses and ask yourself seriously what you are comfortable with, and let that dictate what you ultimately do.
