Many Metro Detroiters are taking advantage of the shelter in place order to check things off their to-do list. Taxes are filed. Spring cleaning is done and homes are well-organized.
Homeowners are also refinancing or preparing to purchase a new home. In a previous article we discussed Documents Needed to Apply for a Loan During Quarantine. What if your goal is to buy a home very soon but you’re not ready to apply for a loan today? Take advantage of the quarantine to work on your homeownership goals.
Here are 4 tips to help you be fully prepared when you’re ready to apply for a loan.
Create A Vision Board
This will likely be the most fun part of your planning, yet one of the most important steps to keep your goals in check. Studies show that writing down your intentions or creating a photo collage can increase the odds of achieving your goals.
You can create a digital vision board by saving photos on Pinterest and Instagram. Save photos of your dream kitchen or future landscaping ideas. Keep the photos in sight to remind you of your goals, especially when you are tempted to splurge on unnecessary items or do something else that deviates from your homeownership plan.
Get Your Credit in Order
Your credit score is a huge indicator of your financial picture when you are applying for a loan. It shows the lender your ability to pay bills on time and how you manage debts overall. If your credit score is less than desirable, there are actions to take that can improve your score relatively quick. There are several factors that contribute to your FICO score and some of these factors will have more impact than others. The two best things you can do to increase your score is to make all future payments on time and decrease your credit card utilization by paying down your balances. You should also check your credit report for any errors or delinquent accounts.
To learn more about improving your credit score check out the article below:
Improving and Maintaining Your Credit Score for a Michigan Home Loan
Assess Your Debt-to-Income Ratio (DTI)
Debt-to-income ratio divides the total of all your monthly debt payments by your gross monthly income, producing a percentage. Like your credit score, lenders consider your DTI to be a strong indicator of your ability to repay a loan.
Monthly payments would include credit cards, student loans, personal loans, auto loans, child support, and mortgage payments. Other financial obligations such as groceries, utilities and gas are not considered as debt in the calculation.
Assess your DTI ratio and consider where you can improve. Paying down debts can help improve your DTI as well as your FICO score, a win win for your path to homeownership. Also, avoid acquiring any new debts such as auto loans or new credit cards.
Learn more about your debt to income ratio:
How to Determine Your Debt-To-Income Ratio (DTI) and How to Improve it
Consult with a Mortgage Lender
Just because you aren’t ready to apply today doesn’t mean you shouldn’t consult with a mortgage professional. Talking with a mortgage lender now can help you come up with the right plan regardless of where you are in your journey.
For example, there are many different loan products which all have different credit, DTI, and down payment requirements. You may think you need a 620 credit score with a 20% down payment when there are actually loans such as FHA that require only a 3.5 % down payment and 580 credit score.
A mortgage lender can educate you on the loans available and show you which actions to take to improve your financial picture in the shortest amount of time.
Looking for a Mortgage Lender in Oakland County, Michigan?
Do you have questions about the real estate market or are you wondering if you qualify for a loan?
Julie Krumholz is has been helping Michigan homebuyers for over 30 years and has several loan programs available for various incomes and financial situations. If you are looking for a mortgage lender in Oakland County or anywhere throughout Michigan, call Julie from Superior National Bank today at: 586-382-5482 and let her help you navigate through the loan process and answer any questions you may have.
