Loan standards are strict as lenders attempt to avoid another mortgage crisis, so you will want to be sure to avoid any actions that could put your application in jeopardy.
One of the biggest red flags that banks look for is debt. If you have high balances on your credit cards, it may be difficult to secure the best interest rates. Before entering the mortgage process, you should follow these tips for avoiding credit card debt:
– Create a strict budget: Many people find themselves in credit card debt because of overspending. If you are someone who has trouble fending off impulse purchases, you could benefit greatly from creating a strict budget so you can allocate funds to each one of your essential expenses. Of course, making a budget won't help you avoid debt if you don't follow it to a T, so you should be sure that you don't stray. Allow yourself a certain amount of money each month for discretionary spending, and don't breach that total. If you don't spend more than you have, chances are you won't find yourself deep in debt.
– Use low interest credit cards: If your credit allows it, you should only apply for credit cards that have low interest rates. This limits the damage that carrying a balance on your card will do in the long run. Ideally, you will be able to pay your balance in full at the end of each month, but there a certain instances when this isn't possible. For example, you may run into an unexpected expense that forces you to spend the money you were going to use to pay off your credit card elsewhere. With a low interest card, this balance won't hurt you too much staying on your account for an extra month.
– Put away your credit cards: Buying a home is rarely an idea that just pops into your head one day, so you will probably have some time to plan before beginning the process. Therefore, it may be in your best interest you stash away your credit cards in the time leading up to a home purchase, so you don't put your mortgage application at risk. The best plan of attack is probably to remove each card from your wallet, but if you want to be prepared for an emergency situation, you'll need to have the will power to not use credit for impulse purchases.
– Generate a significant savings fund: If you are able to save enough cash, you can essentially be your own creditor. For instance, when you want to buy a new TV, you can tap into your savings account instead of charging it. You will want to leave yourself a safety net for unexpected expenses, but if you make a plan to save for impulse purchases, you are probably going to be better at avoiding credit card debt.
To receive a free quote, simply visit www.capwestmortgage.com/quote or call (866) 614-5959 to speak with a CapWest Mortgage representative today.