Writing down goals isn't the challenge. After all, with a handy dandy word processing system, your laptop or even just pencil and paper, you can write down all the goals you like. The trick is coming up with effective goals you can realistically accomplish. Buying a house means you'll most likely have to qualify for a mortgage. That means you'll need an adequate credit score, a substantial down payment and gross income that leaves enough for the house payment.
While the two of you have formed a joint union, your credit scores haven't. The scores are determined individually, but both scores will count toward qualifying for a loan if both incomes are needed because of the amount of the mortgage. The mortgage interest rate depends on the credit score as well as the type of mortgage and the length of time.
Your first step is to obtain your credit report and scores. Review the reports for any errors. Usually, the credit bureaus are slow to make the changes. However, your lender can request an expedited re-scoring that takes place in about 72 hours.
A minimum score of 500 to 520 is required, as of publication. The higher score will help you secure a lower interest rate. What your goal is depends on where your credit scores are now and how much time before you apply for a mortgage. Raising scores a hundred or so points in six months is achievable.
Pay Down Debt
Not only will your credit score be considered, but also your total debt level and debt-to-income ratio. If you threw the best party of your lives at your wedding reception, your credit cards might be showing the damages. Pay down the debt using some of your wedding gift money. Tighten your belts and get rid of as much debt as you can. But don't close the accounts. A factor in your credit score is your used debt compared to available debt. If you close an account, you'll decrease your available debt total. It depends on how willing you are, how much debt you have and how much you need for a down payment to determine your goal for how much debt you pay off.
Save for Down Payment
A time long, long ago, it used to be that a 5 percent down payment was required. Fortunately today there are programs that allow you to put down as little as 3.5 percent. Your credit score helps determine what your down payment will be, as well as how high or low of an interest rate you'll qualify for.
Lenders also look at your total assets. If you have stuff you never use, such as Aunt Matilda's antique china, you might consider selling the china and banking the cash. Write down a list of all those assets and decide which will be sold and which you'll keep. Try online auction sites, contingency shops or classified ads.
Set a goal for your down payment. Divide that by the number of months you have before you go house hunting and work to save that amount each month.
Increase Gross Income
How much house you can afford depends on how much you can pay every month. Most lenders prefer that you keep that figure at no more than 28 percent of your gross income. For example, if your household income is $4,000 a month before taxes, the your ideal maximum house payment would be $1,120. If you make $6,000, you can afford up to a $1,680 monthly payment. Goals could include getting a new job at a higher salary level from six to 12 months before you apply for the mortgage, getting a promotion at work, working overtime, going from part-time to full-time work or getting a second job.
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