Put simply, if becoming a homeowner is one of your short-term goals, now is a great time to do so. The ongoing COVID-19 pandemic has made the current home buying market unlike any other time (in a good way for most). Mortgage rates have continued to be at record lows for the past year. In addition, many businesses are continuing to encourage their employees to work-from-home, which makes finding the ideal location of your home more flexible. Between low interest rates and job locations not necessarily tying people down, house shopping sounds pretty enticing to many people right now. However, current high unemployment rates and our fluctuating economy could make it difficult for some individuals to qualify for home financing.
Before you seriously consider entering house-hunting mode, it’s important to check your credit score and pull up your credit report from a trusted credit agency. Don’t let the low interest rates and hot real estate market cloud your vision and lead you into making a hasty financial decision before you’ve done your homework.
Key Factors to Consider
- Do I have a steady stream of income? Mortgage lenders ideally want to see that your current income will continue for at least three years after closing on your new home. A mortgage is a long-term commitment – so be sure you’re financially ready, no matter how low interest rates are right now.
- Can I rely on my employment? If you were recently laid off, hired, had your hours cut or work in an industry that is heavily impacted by COVID-19, you may have a harder time getting approved for a mortgage right now.
- Is my credit score in a healthy range? Depending on the type of mortgage loan (Federal Housing Administration (FHA) or Conventional) you plan to apply for, you’ll want to make sure your credit score is between 580-620 ideally. Read more about how your credit score affects your mortgage rate here.
- Do I have enough money saved for a down payment & closing costs? The amount of money you decide to put down on your home greatly influences the interest rate on the life of your mortgage. Closing costs are typically 3-5% of the loan amount and should be accounted for when house shopping.
- Is my debt-to-income (DTI) ratio low to moderate? Consider your monthly expenses that are reporting on your credit report vs your income to determine your debt-to-income ratio. A good DTI ratio is 40% or less when it comes time to applying for a mortgage.
Ways Improve Credit Can Help!
If you answered “no” to any of the questions above, you may have some work to do before it’s the right time for you to purchase a home. By improving your credit score and tackling any credit issues head on, you can qualify for a better interest rate, making your new home dreams a reality. Our variety of credit services, including credit repair , credit monitoring and credit counseling (and even identity theft help), can help you feel confident in your decision to buy a new home.
If you’ve recently been the victim of identity theft and it has negatively impacted your credit, we can help. Sadly, 1 out of 3 consumers are victim of identity theft and require stolen identity help by our professionals. Not only will we work with you to restore your credit, but we will also educate you along the way to try and prevent this from happening again. It’s important to stay current on your credit score and review your credit report to be sure there is no fraudulent activity negatively affecting your credit.
Contact Improve Credit at (704) 877-8739 for all of your credit needs. Our team is responsive, straightforward and confident we can help you secure your financial endeavors – including buying a house! Reach out to us for your free analysis today.