Everyone talks about “rate shopping” when it comes to mortgages. It’s the pervasive belief that misleads a lot of people – but not you, because you’ll read this blog. (wink wink) While some rates can change, what mortgage rate you get mostly depends on how you manage your credit and debt. That’s right. No matter WHERE you go. Jinkies!
No matter what company you go through, the biggest factor is going to be your debt-to-income ratio, or DTI, which is basically your debt and expenses stacked against your income. Managing your credit plays a HUGE role in your DTI! Mortgage lenders look at the past several years when evaluating your application – and much of it depends on your credit. You can figure out your DTI here.
Here’s a few simple tips to improve your credit and help you get a mortgage you’ll love!
How to Improve Your Credit (and Mortgage Rate!)
- Don’t be late. It’s simple, but don’t miss payments. Keeping a steady and on-time payment history is important, and lenders look for it when they evaluate you for a loan. In the mortgage world, if you have been over 30 days late to make a mortgage payment, you have to wait a year before you can refinance or purchase.
- Avoid big purchases. If you’re looking to buy a house in the near future, avoid making big purchases. The new car? It can wait. That much cash flow out of your account can raise a lot of questions when lenders look at your account.
- Don’t open a bunch of credit cards at once. Every time you give your social security number and someone pulls your credit, it’s considered a “hard pull” and will show up on your credit report. TIP: even getting a department store credit card will be considered a hard pull. So when you’re managing your credit, keep in mind that the more inquiries you have over a short period of time, the more it lowers your credit score. Keep yourself to fewer inquiries, and spread them out.
- Don’t close a bunch of credit cards at once. Basically, everything in moderation. Don’t panic and close a bunch of cards at once. Lenders are looking for you to being using 30% or less of your available credit. So having a lot of credit available to you doesn’t actually hurt you – but closing a bunch of your cards could move you from using under 30% to well over 30%.
We believe in you! Keep up the good work. And when you’re ready to get a mortgage, give us a call! We’ve developed a reputation for trying to say yes to every application, even the hard ones – because we believe in faith and family, and that’s what we do. Talk to you then!
The Christian Mortgage Mom