The 3 Best Ways to Prepare Financially to Buy a Home

So you’re planning your move to Tacoma, woohoo! Before you start hiring movers and planning your future hikes on Rainier, follow these real estate tips from a local lender here in Pierce County that will help prepare you to purchase your new home. 

1. Keep your credit card balances below 30% of the limit

This is the biggest mistake I see borrowers making. Their credit score is either not increasing or it’s decreasing because they aren’t paying their balance down before it’s reported to the bureau’s. Paying down credit card debt is often one of the quickest ways to get my client’s credit score up. When you’re going to purchase a home in Tacoma (or anywhere for that matter) your lender is going to look at a few different financial aspects; debt to income (DTI) and credit score being two big things. Keeping your credit card balances under 30% or less (of total available credit) will greatly improve both of these which will qualify you for more and keep your rate lower! BONUS TIP: Don’t close out your credit cards (especially your first few cards ever opened). It is a GOOD thing to have lots of available credit (As long as your balances are low)!

 2. Focus on monthly debt payments to offset debt to income ratio

One thing we will focus on during the pre-approval process, is your debt to income ratio. A debt to income ratio is your monthly debt payments divided by your gross monthly income. In order to get a higher approval, take a look at your monthly debt payments and see which ones have the highest minimum payment with the lowest balance. Focus on paying those accounts off to lower your debt to income ratio.

 You can also focus on keeping your payments low in the first place. Consider how that car payment would affect your debt to income ratio prior to purchasing it. The lower your monthly payments, the higher your approval for a home loan. BONUS TIP: Don’t buy anything big when you’re going through the approval process! Wait to buy that car until after your house has closed, you don’t want to make any big moves that will affect your debt to income etc. 

3. Talk to a “local lender” who knows the Tacoma Real Estate Market

 You want a local lender who is familiar with the market and agents. It’s important to work with a lender who is actively working in your desired area, because they will be familiar with mortgage options specific to that area and turn times to close your loan on time. Also, a local lender has a reputation in that area to maintain. This is how they build their business, closing loans on time and staying familiar with the market trends to set appropriate expectations upfront. 

 Imagine this: working with a lender you found online who gives you a pre-approval. Often they haven’t gathered all the necessary documents to know where you qualify. Once you find the home of your dreams, they begin asking for documents and recognize a problem after reviewing all the documents. Because this lender isn’t local and has no reputation in our area, they aren’t concerned with declining the loan and moving on to the next online application. This is a story we’ve heard all too often.

I’ve worked in the Pierce county area helping people buy homes for the past 5 years. Working in the real estate  market in Tacoma, Lakewood, Puyallup etc. and knowing the ins and outs of how to buy a home here has allowed me to get more of my clients into their dream homes!

Written by Chelsea Cline.