You have made the decision to buy your own home. You believe you are ready and prepared because you have saved, over a significant period of time, to accumulate necessary down payments and reserves. However, if you are like many others, you probably haven’t focused enough on the effects and impacts your credit cards could have, on getting the best possible mortgage terms, or, in some cases, on how some factors might make make getting a home loan much more challenging than it needs to be. None of us enjoys extra stress and hassle, so this article will briefly consider, review, and discuss 4 examples and factors involved regarding credit card management, and how to do it the smart way.
one. Balances on your credit cards: Lenders consider many financial factors, and a key one, which also affects your personal credit score, is the balances on your credit cards. Ideally, they want to see that you are using less than half of your available balance. Several months before applying for a mortgage, be sure to reduce your balances and improve the ratio of available to used balances.
2. Number of accounts/ cards: Most lenders and credit rating organizations don’t want to see more than about 4-6 accounts. Each of these should be, according to the discussion on balances, discussed above.
3. Debt: Take a close look and consider how your credit card balances, when added to other personal and/or consumer loans such as car payments, lines of credit, etc., relate to your income. Mortgage lenders have strict requirements for both your mortgage debt-to-income ratio and your total debt-to-income ratio. Unless you qualify in both areas, conventional mortgages can be extremely difficult and challenging to achieve and receive. Another issue is considering your personal comfort zone and how credit card debt and monthly payments can create additional stress and hassle.
Four. Recently opened accounts: If you are planning to buy a home in the near future, it is essential to avoid adding any additional debt to your existing debts. In my, more than a decade, as a licensed seller of real estate in New York State, I have witnessed far too many cases where people damaged and/or destroyed their chances and/or opportunities by accepting some credit card offer. credit, due to some perceived benefit. For example, when you’re shopping for something at a retail store, resist opening a credit card with that store, because the short-term benefit could potentially have negative ramifications.
Smart consumers proceed, prepared, to make their home buying experience smoother and better. Manage credit card accounts wisely and be prepared!