Millennials Tips to Getting Mortgage Ready
We are all getting older and its time to for us to start settling down and planting roots. That means that it's time to start looking at a mortgage. When it comes to getting a mortgage, you need to make sure you are financially stable, even if you are planning on taking out a loan to help pay it off. To get a better understanding of how much you may pay back monthly, using this loan calculator could be a massive help. It is never too early to plan for your future, or at least look into it a little.
Even if you aren’t interested in living in the house to raise a family, real estate is still the number one investment opportunity. Check out these tips for millennials to be ready to get a mortgage provided by Experian.
Get Organized
Start by pulling your credit reports and credit scores to understand where you stand. Review your reports to refresh your memory on what credit cards and debts you have outstanding.
Get your free credit report from Experian, where you can also get your FICO® Score. You are also entitled to one free credit report every 12 months from Experian, Equifax, and TransUnion at AnnualCreditReport.com.
Then, make a list of all your loans, who services them, and how much you pay each month. The same goes for any car loans. Similarly, make a list of all your assets, including bank accounts, 401(k)s and IRAs, and any other savings you might have. Banks will want to know all this information.
An account aggregation service like Mint.com or Personal Capital can help you put together your complete financial picture. Tiller is another service that experts recommend for examining your spending and budgets at a granular level.
Write Down Your Goals and Prioritize Them
You can’t do that until you know exactly what they are. If you want to pay off your student loan debt, save for a vacation and buy a home, you need to write all the goals down and prioritize them.
Start by identifying what your goals are and then quantify those goals by time and value: When do you want to achieve them and how much is that going to cost? You might be lucky enough to have parents that are happy to consider types of equity release to support you in your quest for a deposit. But I digress.
Then, prioritize according to what’s most important to you. Once you do that, you can figure out how much to save and when you will reach your goal.
Go Over Your Budget and Identify Areas Where You Can Save
You’ll have to figure out your cash flow situation and to do that, you need to create a budget and examine where you’re spending your money.
To get there, you need to create a budget and track your spending, including groceries, utilities, childcare, and entertainment. Check it every three months to see how you’re doing and identify the opportunities for savings. You might have to cut expenses, take on extra work or find a new job, but you can’t do that until you know how much money is coming in and going out.
Once you have a budget and know how much you can save each month, apply those amounts to the goal system you created. Based on how much money you are able to save, you might have to adjust your goals, whether that means opting to spend less money on a home or extending the amount of time it will take to save up for one.
Start to Eliminate Debt and Make Payments on Time
Remember, improving your credit scores is the key to getting the best mortgage rates, which can save you thousands of dollars over the lifetime of a loan.
Once you’ve identified how much you can save each month, you should also figure out how much of your money you can apply to pay down your debts. Cutting down credit card debt should be a primary goal because that will boost your credit scores significantly. It might be a good idea to consolidate debt to make it more manageable in the long term. Consider using services similar to quickloans.co.nz to consolidate debt so you can work towards bringing your overall debt down to improve your credit score.
You should also make it a habit to never miss paying a bill on time because even one late or missed payment can drag your scores down. (Late payments stay on your credit reports for seven years, but the most negative impact is at its peak in the first two years.) Set up automatic payments so you don’t ever forget.
Don’t Use More Than 30% of Your Available Credit
Your credit utilization ratio is the amount money you spend on credit cards each month compared with the amount of total credit available to you. You’ll want to keep your credit utilization ratio under 30%, and for the best scores, under 10%.
That means you need to tally up the limits across all your credit cards, and only charge, on a monthly basis, 10% of that.
Review Your Credit Reports Regularly
Make a point to check your credit reports at least once a year to review them for errors because your scores are calculated based on the information in those reports. You’ll find your reports at each of the three credit bureaus: Equifax, TransUnion, and Experian (the publisher of this article). If there are any errors, you should initiate a dispute with the credit bureau.
Get your free credit report from Experian, where you can also get your FICO® Score. You are also entitled to one free credit report every 12 months from Experian, Equifax, and TransUnion at AnnualCreditReport.com.
Don’t Open New Lines of Credit
When you’re getting ready to apply for a mortgage, avoid opening new credit accounts, because that will likely bring your scores down.
Photo Credit: Aaron Huber
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