Earlier this year, we wrote an article, discussing the things not to do, before applying for a home loan.
In this article, we will look at the other side of the picture and provide some tips, for things to do, prior to applying for a home loan.
These items below are tips that can not only help you qualify for a home loan, but also qualify for the best interest rate possible.
As always, if you don’t do these items, it doesn’t mean that you can’t qualify for a home loan. Everyone’s situation is unique and I always recommend reaching out to a lender, sooner than you think you need to, in order to prequalify for a home loan. That way, if something does need to be corrected, it can be addressed ahead of time.
Now, here is our “To Do” list, when it comes to applying for a home.
Do: - Pay Down Your Credit Card Balances To Below 50% of their limit, every month
If your credit is pulled and you have a credit card that shows a balance of more than 50% of its credit limit, it will negatively affect your credit score. The percentage of your credit card balances, compared to your overall credit limits, is a much bigger factor in your credit score, than your overall credit card debt.
For that reason, if you are looking to apply for a home loan soon, make sure and pay off your credit card balances to less than 50% of their limits, every month.
Or in other words, if you have two credit cards and one has a $4,000 balance and a $10,000 limit and then second card has a $800 balance and a $1,000 limit, then your first course of action, should be to pay down that smaller credit card balance and not the larger. You want to focus on the percentage balance of each card and not the total amount owed on each card. Keep that percentage at less than 50%.
Do: - Keep Your Accounts Clear Of Any Large Deposits (which cannot be documented)
If you have a large amount of cash on hand, it is not advisable to deposit those funds and then apply for a loan the next month. If you can not prove where the funds came from, via a cancelled check or some other source, then you don’t want to deposit the funds into your bank account right away.
If you are getting a gift for your down payment, then that is fine, but please consult with your lender, for the proper process and documentation to complete this process.
Do: - Work Your Normal Work Schedule
If someone is a salaried employee, then this generally would not come into play, but for hourly employees this is an important consideration.
If there is a documented reason for missed employment hours (such as the birth of a child, medical leave, etc.), then that would be fine.
However, if you are an hourly employee and your pay stub hours vary wildly, then you will want to try and stabilize those hours. Unless you can document that is a common practice in the industry you work in for varying hours, you will want to demonstrate consistent work hours, from paycheck to paycheck.
Do: - Pay Your Monthly Payments and Monitor Your Bank Account Balance
– This last one is common sense, but if you are thinking of applying for a home loan soon, make sure and stay on top of all payments, as you do not want to miss a payment on anything and have it affected your credit score, just before applying for a home loan.
By the same token, you must also monitor your bank account balance and not overdraw your bank account, as lenders will often look at this, the same way as they do a missed payment.
These are just some of the many things you can do, to help ensure you can qualify not only for a home mortgage loan, but also the best interest rate on that loan.
As always, to qualify for a new home loan, it is best to sit down with a licensed mortgage lender, such as Strategic Mortgage and be properly pre-qualify for a new home loan.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: email@example.com or online at www.strategicmtgaz.com
Vasilios Kamboukos – NMLS#160440