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  • David Burrows

6 Financial Musts for New Homebuyers


By Nicole Markle

 Buying your first home is a big step. But when you consider how much of your income you spend each year on rent, the prospect of applying that sum toward a property of your own can suddenly become very attractive, especially if you feel rooted in your community and want to stay there for the foreseeable future.

If you’re thinking of applying for a mortgage loan, it’s important to have your finances in order first. Lenders consider things like your annual income, credit score, credit history and payment behavior before approving your application. In light of this, information on your credit and bank statements that could raise red flags and stand in the way of your being approved for a home loan. Read on to find out what to watch out for...

1. Incorrect information on your credit report. The three large consumer reporting agencies, Experian, Transunion and Equifax, keep track of your credit and are each required by law to provide you with a free credit report every year (upon your request). This allows you to check your reports for negative information that you’ll want to improve before applying for a mortgage. In addition, it’s important to note that if incorrect information is included on any of the reports, your credit score might be different on each, resulting in discrepancies. According to, these discrepancies can cause lenders to give you less favorable terms on a loan. If any information is incorrect on your report, follow the Federal Trade Commission’s guidelines or the instructions provided by the appropriate reporting agency to have your reports corrected.

2. Multiple credit inquiries. Every time you apply for a loan, you authorize the lender to check your credit, according to For things like car loans, student loans and mortgages, lenders generally disregard other inquiries in the previous 30 days. However, if you’ve been applying for multiple credit cards to take advantage of low rates, the Consumer Financial Protection Bureau (CFPB) says this can lower your credit score. To avoid this, the CFPB advises that you refrain from applying for or opening multiple new credit accounts within a short period before applying for a mortgage loan. 

3. Late payments and collection agencies. Paying your bills late looks bad on a credit report. Experian notes that late payments and being reported to a collection agency can negatively affect your credit score. So, make sure to always pay your bills on time.

4. Approaching your credit limit. Sometimes, you need credit to manage unexpected expenses. But if you’re habitually close to your credit limit on each loan or credit card, the CFPB says credit scoring models may predict you’ll have trouble repaying debts. The CFPB says it’s best to keep credit debt at or below 30 percent of your credit limit. For example, if you have a credit line of $15,000 on a credit card, make sure to keep your debt on the card below $4,500.

5. Excessive monthly payments. According to Mortgage Calculator, creditors look for excessive monthly payments, which can signal that you’re living beyond your means.

6. Bank account deposits other than your regular income. Home Loan Learning Center advises that if you receive any income other than your salary, make sure you can explain where it’s coming from. Things to think about are alimony, child support, stipends, allowances and personal assets such as such as stocks and bonds.

Buying a home is an exciting prospect — and a major financial responsibility. Preparing your financial affairs and having necessary documentation on hand for a prospective mortgage lender can help bring you one step closer to owning the place of your dreams.

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