Financial Resolutions to Make Now if You are Thinking of Buying a Home in 2018

Are you thinking of buying a home this year? Here are some financial resolutions that you should keep in mind if you plan on buying in the near future. Remember it’s not always just about saving money; these tips will ensure that you are able to easily qualify for a mortgage without any surprises!

#1 – Don’t Make Any Large Purchases

Avoid making large purchases unless you are able to pay cash for them. This can include cars and vacations. Piling on debt, whether it’s on a credit card or in the form of a loan, can significantly affect how much you will qualify for on a mortgage. How much money you make compared to how much debt you have, your debt-to-income ratio, is one of the major factors in mortgage qualification. And don’t assume that if you are pre-approved, you will be fine as a pre-approval is contingent upon you not making any major financial changes.

If you do make a large purchase or accumulate any debt, contact your mortgage broker or bank right away to see how it may have affected you. If you are required to make a surprise larger purchase, consider the cheapest option for now. For example, if your car dies and you absolutely require a vehicle, consider buying a cheaper used car for the time being as opposed to that fancy new one!

#2 – Try to Avoid Job Hopping

Changing jobs may send off red flags to lenders. Steady employment is generally believed to equate to steady income and all these factors are considered in the mortgage qualification process. It’s not to say that if a great opportunity arises that you shouldn’t take it but understand that it may affect your mortgage application. If you take a new job during the process, let your lender know and you may need to provide extra-documentation.

Some job changes can be beneficial like if you are moving from hourly or commission based income to a salaried position because your income then becomes far more predictable. On the other hand, if you are thinking of leaving your current job to start your own business, now is not the time; most lenders will not consider income from self-employment until it has been claimed over 2 tax years.

#3 – Avoid Using Your Credit Cards Where Possible

Even if you pay off your card every month, you could run into trouble if your credit report is pulled mid-cycle. Start using your debit card or cash where possible to ensure you don’t run into any trouble. If you do use your credit card, pay it off as frequently as possible and don’t wait until the end of the billing cycle, especially if you are in the process of applying for a mortgage.

You should also consider canceling or limiting your monthly subscription services. These recurring payments can certainly be convenient but can add up quickly!

#4 – Do What You Can to Save

Now is the time to save as much as you can. Every penny that you can put towards your home in the form of a down payment can be significant. Over the next few months, limit eating out and maybe even skip your daily coffee (make one at home instead). Try to eliminate all the extras from your budget. This will help you stay on your cash budget and ensure that you are in the best financial shape possible when you purchase your home. And remember, if you are creative with your cooking and activities, you may not miss all those expensive extras at all!

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