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You’ve searched for months and now, finally, you’ve found the home of your dreams. Although owning your own home may seem like a dream, sometimes the process of getting there isn’t as exciting. Once you find your dream home, you have to negotiate a price, sign papers, take out a loan, make sure you are covered for home insurance, and the list goes on.
At Copperleaf Properties, we work hard to make your home buying experience enjoyable, exciting, and best of all stress-free. For this reason, we feel it is important to educate potential home buyers on the process and any actions they can take early in the process to make the experience run as smoothly as possible. Here are five things every future homeowner should do to have a successful home purchase.
When purchasing a home, it is important to to know how much you can afford to spend before you begin searching. The best way to do this is to get pre-qualified. Getting pre-qualified is a fairly simple process. First, you will need to provide some financial information to your preferred mortgage lender, such as your annual income and the amount of savings and investments you have. After that, the lender will review your information to see much they can afford to loan you.
This information is important as it will determine the price range of homes you should be looking at. Later in the process, you can get pre-approved for credit, which will include providing financial documents such as W2’s, bank account statements, paycheck stubs, etc. This will allow the lender to verify your financial status and credit.
A credit report provides a history of your credit, bad debts, and any late payments. When purchasing a home, your credit score will be a big factor in your interest rate and the amount of money you are able to borrow, so you will want to make sure everything looks accurate and correct any errors before beginning this process.
Here are a few factors that can contribute to or hurt your credit score and things you should keep an eye on if you are looking to purchase a home in the near future:
Payment History
Did you pay your credit card bills on time? Bankruptcy filing, liens and collection activity also affect your history.
How Much Do You Owe and Where?
If you owe a great deal of money on numerous accounts, it can indicate you are over extended.
Length of Credit History
The longer you have the account, the better.
Applying for More Credit
Every time you ask for credit, everything from applying for a mortgage to a store credit card, a hard credit inquiry is made on your account. Every hard inquiry affects your credit score, even when you don’t get approved.
How Much New Credit You Have
New credit cards and installment plans are considered more risky, even if you pay down the debt promptly.
Canceling Your Zero-Balance Credit Cards
Even if you have paid off a credit card, hold on to it. Canceling a credit card can actually hurt your credit score. It reduces your total credit amount, which can raise your credit utilization ratio. It can also shorten the age of your credit history.
The Types of Credit You Use
It is good to have more than one type of credit. Examples of different kinds of credit are installment loans, credit cards and a mortgage.
To learn more about improving your credit score to purchase a home, keep reading here.
You don’t need to have the same job forever. However, having a job less than two years may mean you have to pay a higher interest rate.
Lenders will look at your debt-to-income ratio. This refers to how much of your income is absorbed by debt. Mortgage lenders want to know what is left over after all monthly bills are paid. The ratio is calculated by dividing monthly debt payments by gross monthly income.
A good credit score will give you power to negotiate a lower interest rate on a new loan, qualify for higher limits, and even lower your insurance rates. Additionally, a good credit score can eliminate security deposits on utilities and cell phone plans.
© Copyright 2023 by Copperleaf Properties. All rights reserved.
© Copyright 2019 by Copperleaf Properties. All rights reserved.
