Are you tired of renting? Are you ready to take the plunge and buy a home? If so, then make sure that you add these 10 New Year's resolutions to your list! By following these tips, you will be well on your way to homeownership in no time. But before we give you the good stuff, let's back up for a bit. Every year thousands of prospective homeowners have their mortgage applications rejected for one reason or the other. Why does this happen? What are the major reasons that banks reject loan applications?
One of the most common reasons why mortgage applications are rejected is poor credit scores. Banks and mortgage lenders require good credit scores – generally a FICO score of 680 or higher – to qualify for a loan. If your credit score is lower than this, you'll need to improve it before applying for a loan. That's why your first New Year's resolution should focus on improving your credit score. Make sure you pay all bills on time and keep your debt load low relative to your income level.
Your second resolution should be focused on increasing financial literacy. Take the time to learn more about mortgages and the process of buying a home so that when you apply for a loan, you will have a better chance of being approved.
Your third resolution should be to begin saving for a down payment and closing costs. Most lenders require an initial down payment of at least 5 percent, but the more money you can put toward your down payment, the better. Also, keep in mind that you will likely have to pay several thousand dollars in closing costs when buying a home, so make sure you are prepared for this expense.
The fourth resolution on our list is to create a budget and stick to it! Make sure that all your expenses fit within your income level and save any extra money you have each month. This will help you prepare for the big purchase and ensure you can afford the monthly mortgage payments once you own the home.
Financial stability is essential when buying a home, so your fifth resolution should be to track your income and expenses. Make sure you show lenders where your money is going each month and that you have enough left over for the mortgage payments. If you are serious about financial stability, you should avoid job hopping. This is because changing jobs a few times in the years leading up to your loan application can be seen as a red flag by lenders.
Your sixth resolution should be to start building an emergency fund. Having some savings aside for unexpected expenses that come with homeownership, such as repairs and home improvement projects, is important.
The seventh resolution is to get pre-approved for a mortgage before you begin looking for homes. This will give you an idea of what price range you should be looking in, and it will put you at an advantage against other potential buyers when it comes time to make an offer on the house.
Your eighth resolution on our list is to pay off any existing debt obligations. The more debt you carry, the less likely you will qualify for a loan. So ensure that any outstanding balances are taken care of before applying for a mortgage.
Your ninth resolution should be to stay in one place, figuratively and literally! Lenders want assurance that their customers will remain in the same residence for at least five years. Therefore, you mustn't move around too much in the years leading up to applying for a loan.
Resolution number tenth is one of the most important things you can do before buying a home: Shop around! Make sure you compare mortgage rates and terms from multiple lenders to find the best deal. Doing so can save you thousands of dollars over the life of your loan.
Your eleventh resolution should be to remain patient throughout the process of buying a home. It can take several months – sometimes even a year – for the entire process to be completed, and you will likely encounter some roadblocks along the way.
Your twelfth and final resolution is to be prepared for any possible hiccups along the way. Make sure you have a plan in place if something goes wrong with the loan or your credit score takes a dip before closing on the house.
While New Year Resolutions are great promises for the coming year, they can only help you if you follow them through. It is easy to say that you should cut down on unnecessary expenses, but in reality, it is much harder to stick to the plan. With these twelve New Year Resolutions, you'll be well on your way to buying a new home this year! Good luck and happy house hunting!