Before you contact a lender to buy or refinance a home, a smart move would be to take time to look at your financial status through the eyes of a lender. Give yourself as long as six months to get your financial house in order prior to applying for a loan. There are some things you can do in advance so that a lender will view your creditworthiness in a positive manner.
Even if your credit score is as high as 740, work on bolstering it to a higher number to assure the best rate and terms for your loan. The same holds true if your score is around 660. Control your credit balances and your payment record, both of which are the major influencers of your credit score.
Since your credit balances make up 30% of your credit score, it is important to pay them down as much as possible before you submit a loan application. Evaluate your budget and start reducing how much you spend on nonessential items. Direct those dollars towards reducing your credit balances. Ultimately, the amount of debt you have will factor into your debt-to-income ratio, a number that helps a lender determine how much new housing debt you can qualify for.
Since borrowers who exhibit the strongest financial standing get the best loan terms, you can further improve your position by increasing the amount of your savings. A lender will want to see that you have enough funds to cover your down payment and closing costs. You should also have enough savings to cover a few mortgage payments in the event your income stream gets interrupted.
You want to get yourself in the best financial shape possible before you buy or refinance. It’s never too early, so please contact me for further guidance. I am always here to help.