Industry insiders are predicting some changes in the real estate market in 2019. If you're planning to buy in the new year, it's helpful to start preparing now. By getting a jump on your home buying plans, you can make the process much smoother when you're ready to take the plunge. Here's how you can get started preparing for your new home purchase in 2019:
Know Your Credit Score
Your credit score is a key piece of information in your preparations to buy a home. If you have a low credit score, you might want to make some changes to improve your credit profile. The better your credit score is, the better interest rates you can qualify for from lenders and the more house you can buy for the money. You can check your credit score using services like Credit Karma and Credit Sesame without impacting your credit score (called a soft-check). When a potential lender checks your credit score as part of your application process, it will drop your credit score a couple of points (called a hard-check) so be careful how many lenders you apply with.
Check Your Credit Reports
You can get a copy of your credit report from each of the top three credit bureaus in the U.S. (Experian, TransUnion and Equifax) once every year/12 months. Get a copy of your report from each bureau and check each one thoroughly for anything that is incorrect. Inaccurate information on your credit report can have a major impact on what lenders will offer you when you're ready to buy. Each bureau has instructions for how to dispute or correct inaccurate information.
Build Up Your Savings
You'll need to beef up your savings account for a number of expenses and payments. The biggest of these expenses will be your down payment. You'll also want to have approximately three to six months of living expenses saved up. Lenders see this as a good sign you'll be able to cover your mortgage payments. You might also need money for appraisal fees, home inspections, HOA fees, home insurance premiums and possibly closing costs.
Be Smart With Credit Cards
Don't open or close any credit card accounts if you can avoid it. Closing inactive accounts can actually lower your score by changing your debt ratio. Lenders prefer to see that applicants are using less than 35% of their total credit availability. This means if you have $10,000 of available credit, lenders like to see your total balances under $3,500. If you close an inactive card that has a $3,000 limit, you have decreased your available credit to $7,000. This makes that $3,500 in credit card debt 50% of your available credit instead of 35%. Also, don't open any new credit accounts - including credit cards, auto loans or anything else you would finance and make payments on.
Lenders are expected to reign in their requirements for mortgages in 2019 as home prices continue to increase (though more slowly) and mortgage interest rates also increase. Keeping your credit healthy is the best way you can prepare to buy a home in the new year. Have questions? Your Century 21 Broadhurst agent can help answer your questions or connect you with resources to help you get ready to buy.