Most people can qualify to purchase a home and they don’t even realize it!
I can tell you from experience that often times people just like you get very close to qualifying and then make a very simple mistake that sets them back. If only they would have known what simple mistakes not to make.
If you are considering buying a home this 2019 avoid making these 3 common mistakes.
Bad or No Credit
Credit is the number 1 reason why we see people not qualify for a home. Some people make a really good amount of money but have bad credit so they do not qualify. On the contrary, people who perhaps have a minimum wage job but have excellent credit actually qualify for more than their counterparts. This is because credit measures how much debt you have and therefore less available funds for a mortgage payment, as well as how well you are at paying debt payments on time.
If you have bad credit, do not worry, you may still qualify. There are banks that work with credit scores as low as 500. However, the higher your credit score the better interest rate you will get, and therefore save money on your monthly payments.
If you do not have any credit, then this will disqualify you from purchasing a home in most cases as well. An easy way to build credit is simply by applying for a credit card and just putting one bill, for example a phone bill, on auto-payment with it. Then, pay the balance off in full at the end of every month. Within 60-90 days, you should have a good credit score.
Buying a car on credit
Buying a car may not seem like such a big deal, but often times is the reason why people don’t qualify to buy a home. Or if they still qualify, it is not for nearly as much as they would have if they didn’t have that debt. And in this market every little bit counts! Car payments count against you because it shows that you have a responsibility of a large monthly payment that takes away from your available income that could go towards a mortgage. The lender sees that you have a monthly payment of $250+ that you have to make for your car loan. That is $250+ less a month that you are able to use for your mortgage payment. This $250+ debt counting against you every month actually makes a significant difference in how much you can qualify for. It can make a difference of up to $50,000-$100,000 less that you qualify for because of that new car loan! If you are planning on buying a new car or already have a car payment, do not worry, you may still qualify. However, you may need to apply with a cosigner in order to help you qualify for what you need.
Starting a New Business
Believe it or not starting a new business will ensure you do not qualify regardless of how successful your business is in your first year. You will have to wait 2 years of being self-employed before you can actually apply to purchase a house. The reason is because not even you know how much you are going to really be making regularly in your new business. The bank wants to see that you have made a consistent amount of income in the last two years to get a better idea of what you are averaging in income each year. They are lending you a lot of money and want to make sure that you can afford to pay them back.
However, if you currently work a W2 job, it is best to get qualified for a house first, purchase your home, then go out and start your new business after. Why? Because with a W2 job, the bank sees that you have a set hourly rate and a yearly expected salary. The bank can see exactly how much you can expect to get paid every year. Therefore, you will not have to wait a whole 2 years before you can qualify. You can start a new W2 job and only be there for 1-3 months and still get qualified because the bank can see your pay stubs and see exactly how much you are “guaranteed” to make. Nothing in life is guaranteed, but let’s say for lending purposes a W2 job seems more stable and predictable; than someone who is newly self-employed and doesn’t know when or where their next pay check is coming from. So, if you are wanting to buy a house and also start a new business, just be patient. First, get your house, then start your business after.
These are the 3 most common mistakes that Mora Real Estate has seen people make prior to purchasing. The good news is you may be more qualified than you think to purchase a home! Just be aware of these simple mistakes that can set you back. Everyone’s scenario is different; therefore, it is important to work with a professional who can best guide you based on your situation. Purchasing a home is very attainable if you have all the right information and game plan ahead of time! Please reach out to your trusted realtors at Mora Real Estate with any questions or for a free consultation.
Lorena Zamora – Associate Broker Ariel Mora – Broker Owner
(720) 829-0959 (303) 525-1402
The examples in this blog have been generalized; based on personal experience and shall not be taken literally. Mora Real Estate shall not be liable for any actions taken related to this blog. Results may vary based on income and credit worthiness.