Keep Improving Your Credit

​Congratulations!! Your credit is improving and you are getting closer to achieving your financial and real estate goals. Here are some additional tips to consider. 

1. Racking up Debt
Taking on additional debt before applying for a mortgage doesn’t make much sense. Your debt-to-income ratio – or how much debt you’re paying off each month in comparison to how much money you’re making – is just one factor that lenders look at when reviewing your mortgage application. If it’s above a certain threshold (typically 43%), you’ll be considered a risky borrower.

2. Making a Major Purchase. Buying something big like new appliances or a new car could lead a lender to reject your mortgage application. You’ll need to have cash on hand when you’re buying a house so that you can pay your earnest money, closing costs, etc. Once more, if you have to take out a loan or swipe a credit card to make that purchase, that could affect your credit score if you can’t pay the bill in full on time or your debt-to-credit ratio rises. If you’re tired of renting and you’re ready to buy a house, it’s best to try and reduce your financial obligations before applying for a mortgage. 

3. Marrying Someone with Bad Credit
 It’s not uncommon for couples to buy homes after tying the knot. Keep in mind, however, that if you plan on getting the house together, both of your credit scores and financial histories could be taken into account. If you’re marrying someone whose credit isn’t in tip top shape, it might be a good idea to work on improving his or her score (and paying off the wedding loan or extra debt you both took on) before trying to get a home loan.

4. Co-Signing on a Loan
It’s important to think carefully before agreeing to co-sign a loan for a child in college or another family member, particularly if you’re trying to become a homeowner. By co-signing, you become partially responsible for that debt. If the borrower can’t keep up with payments and defaults, your credit score could dip substantially. This is not to say you should not co-sign, but do think it through carefully.

5. Making Big Deposits. Your relatives can help you pay for your down payment, however there are rules related to down payment gifts. You can’t deposit the money into your account without properly documenting it. Generally, making a large deposit into your bank account prior to visiting a mortgage lender won’t look good. Lenders normally want to see that you have plenty of money in your account that’s been there for at least two months.