The New Year is a time to start fresh, set new goals and make plans. If your goal is to position yourself financially to build or buy a home, these tips will help get you on the right track.
1.) Get Your Credit in Check. Credit is a big factor in the home buying/home building process. It's important to regularly monitor your credit. Free credit pulling apps like Credit Karma make it easy to check. Today there are many credit cards that offer free FICO scores to help you keep an eye on your credit. You also want to focus on chipping away at debt to lower your DTI (debt to income ratio). Did you know? You can build a new home with a credit score of 580 or higher!
2.) Smarter Savings. Have you looked at your savings account interest rate lately? The average savings account has a low 0.06% APY (annual percentage yield, or interest). Even some high yield savings accounts top out at 1.10%. If you have a large sum saved, consider switching to a low-risk Money Market Account and earn closer to 1.45% APY with interest compounded daily and paid monthly. Today, money market accounts are FDIC insured and with most accounts, you can easily access and transfer money online. This article provides a few options and more information: Best Money Market Rates & Accounts – January 2018.
3.) Collect Important Documents
In order to get pre-approved for a home loan, most banks require the following documents:
- Pay stubs covering the last 30 days
- Bank statements, including all pages covering the past 60 days of your checking, savings, investment and retirement accounts
- Last two years tax returns, including all pages and all schedules of your personal and/or business returns with W2s, K1s, 1099s
- Valid photo ID
- If you own property, copies of the mortgage statements, property tax bills and home owners insurance policy
** These tips are best practices and suggestions. Please consult your financial advisor first.