You have made the decision to buy a house of your own. You think you’re ready and prepared because you’ve saved, over a significant period of time, to build up the necessary down payments and reserves. However, if you’re 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 could make make getting a home loan much more challenging than it needs to be. None of us enjoy added stress and hassle, so this article will briefly consider, review, and discuss 4 examples and factors involved with regards to credit card management, and how to do it the smart way.
1. Balances on your credit cards: Lending institutions consider many economic factors, and a key one that also affects your personal credit score is your credit card balances. Ideally, they want to see that you’re using less than half of your available balance. Several months before you apply for a mortgage, be sure to reduce your balances and improve your available-to-used ratio.
two. 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, in accordance with the discussion on balances, discussed above.
3. Debt: Take a close look and consider how your credit card balances, when added to other consumer and/or personal loans such as car payments, lines of credit, etc., relate to your income. Mortgage lenders have strict requirements for both mortgage debt-to-income ratio and total debt-to-income ratio. Unless you qualify in both areas, conventional mortgages can be extremely difficult and challenging to obtain 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 real estate seller in New York State, I have witnessed far too many cases where people have 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 buying 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!
