No matter if you are newlyweds purchasing your first together home, a senior moving into more convenient housing, or a young singleton making your first major purchase, buying a house is a big deal.
Making these all-too-common mistakes when applying for a home loan can:
• Reduce the amount of funding you qualify for
• Result in a higher interest rate on your mortgage
• Cause a lender to reject your application altogether
If you’re looking for a Real Estate Broker in Los Angeles, Peak Finance Company not only specializes in traditional loans at competitive rates, but also works on behalf of credit-challenged, self-employed, and first-time home buyers!
Rule #1: Don’t Rack Up Debt
Your Debt-to-Income ratio is a comparison of how much debt you pay off each month vs. how much income you are making. You can calculate your DTI Ratio very easily at home!
DTI=total monthly debt payments/gross monthly income
Typically, if your DTI is above 43%, you will be considered a “risky” borrower.
Rule #2: Don’t Forget to Check Your Credit
Your credit score shows lenders whether you are fiscally responsible and if they will be able to count on you to pay off your debts in the future. Knowing that lenders will definitely be taking a look (and judging), you should check your credit score and make any improvements you can before applying for a loan.
Rule #3: Don’t Fall Behind on Bills
Just one missed bill payment can take your credit score down quite a few points. Save your score by signing up for online billing and submitting all payments on the 15th of every month.
Rule #4: Don’t Max Out Your Credit Cards
Using up all the credit you have available hurts your credit score. Your Credit Utilization ratio is the amount of credit you’ve used relative to your credit line. Your CU is another ratio you can calculate very easily for yourself.
CU=current credit card balance/available credit line
The number you get shouldn’t go above 30%. When you are shopping for a new home, it should be as low as possible.
Rule #5: Don’t Close Credit Card Accounts
Although it may seem prudent to have less credit cards, closing an account means you will have less available credit – and it could send your Credit Utilization ratio soaring! Pay down your cards but keep the accounts open for the biggest impact.
Rule #6: Don’t Make Any Major Purchases
When purchasing a house from a Real Estate Broker in Los Angeles, you will need to be ready for your down payment, closing costs, and insurance. Save your cash to invest in your home and don’t spend it on other big-ticket items like cars and major appliances. If you make a major purchase on credit, your debt-to-credit ratio will rise – and lower your credit score.
Whether you seek a loan for a new home or want to refinance, Peak Finance Company can offer you the best Real Estate Broker in Los Angeles. If your circumstances are unconventional and not a “fit” for traditional lenders – Peak Finance Company can help! Call 877-874-7325 or click here to send an email today!