With the holiday buying season almost in full swing I thought it was a great time to discuss some financial guidelines to follow if you’re hoping to buy a home this upcoming spring. I asked my friend Bonnie Osadchey, a mortgage originator at Elmira Savings Bank, to share some insights on what banks look for when applying for a loan…
- NO LARGE PURCHASES. This includes cars but can also include furniture, appliances and jewelry, especially if you would need to take out a loan or use a credit card to finance the purchase.
- KEEP CREDIT CARD BALANCES LOW. It’s very easy to say “charge it” when spending for the holidays but this is one of the areas the most important areas to keep control of. Your balances should be kept at or below 30%.
- PAY ON-TIME. A late payment stays on your credit report for a whole year so unless you have a grace period even paying a day late may affect your credit score.
- FILE YOUR TAXES EARLY. Banks will need your current income tax returns so filing as soon as possible after the New Year is preferred. If you’re self-employed this is even more important as banks will require two years’ worth of returns showing your self-employment income.
- KNOW YOUR DEBT TO INCOME RATIO. Most banks will ask for a debt-to-income ratio of 43% or less. Included in that is any revolving debt which includes current mortgage payments, student loans and credit card payments.
- BEWARE OF DISPUTING THINGS ON YOUR CREDIT REPORT. You can receive a free credit report (you should never pay for your credit report) annually at annualcreditreport.com. If you find something that doesn’t look right beware of filing a dispute, this can actually poorly affect your chances of getting a loan. Talk to your loan officer first to see if there is another way to solve it first.