This is the year. You have written it down as a New Years Resolution right next to your gym membership. This will be the year that the perpetual throwing away of your well earned money stops. The year that you will make an investment for your future instead of lining the pockets of your landlord (who could have used the money to fix the ridiculously noisy heat pump thats on its last leg). Yes, 2016 will be the year you will enter the world of homeownership.
And as fun and exciting as that pep talk may sound, there is still a small yet annoying voice eating away at you and consuming you with worry and doubt. A person can drown in the ‘what if’s.’ Consider this a life preserver, and let us save you by laying out three easy ways to prepare for a mortgage.
1. Reduce Your Debt-to-Income Ratio.
There are two ways to lower your debt-to-income (DTI) ratio, reduce your monthly recurring debt and/or increase your monthly income. Focus on reducing your debt by purchasing the essentials, or rather items of need, not want. Yes, you may need a trip to the spa, but is it a necessity? Why not use that money to go towards your credit card payment? Making a monthly budget and sticking to it will not only help you in the long run, but will also give you a sense of accomplishment as you see your savings account going up and your debit going down. Check out apps like Mint, LearnVest, and EveryDollar to help you along the way!
2. Get to Know Your Credit.
Outside of knowing your DTI ratio, knowing your credit score is just as or even more important. This will be a huge part during your application process for a home loan. Knowing exactly what is on the report is imperative. According to a 2013 Federal Trade Commission study, 1 out of 4 consumers reported errors on their report. These wrongful claims effected their credit scores and lead to higher rates. Dispute errors you may find by mailing the bureau documents that support your claim along with a letter detailing the dispute. Make sure to pay off any outstanding delinquent accounts and make payments in a timely manner. Remember, even though the girl working the register says she will give you 25% off by opening up a store card, be cautious of opening up new lines of credit for the sake of your score and your DTI ratio.
3. Learn from the Professionals.
Have you ever heard the phrase “straight from the horse’s mouth?” When it comes to figuring out how to navigate the uncharted waters of attaining a mortgage, look to the professions. Ask your Team Teller Realtor for recommendations of Loan Officers in your area. They are there to assist and aid you through the process as well as give you a game plan in which to follow to get you on the right track to homeownership.