You’ve made the decision, to buy a home, of your own. You believe you are ready, and prepared, because you have saved, for a significant period, to accumulate the necessary down – payments, and reserves. However, if you are like many others, you probably, haven’t focused, enough, on the effects and impacts of your credit cards, might have, on obtaining the best possible, mortgage terms, or, in some cases, how some factors, might make securing a mortgage loan, far more challenging, than necessary. None of us enjoy added stresses and hassles, so this article will briefly consider, review, and discuss, 4 examples of, and factors involved, regarding credit card management, and doing so, wisely.
1. Balances on your credit cards: Lending institutions consider many economic factors, and a key one, which also, impacts your personal credit score, are the balances on your credit cards. Ideally, they want to see, you are using, less than half of your available balance. Several months prior to, applying for a mortgage, be certain you reduce your balances, and enhance the relationship, between available and used, balances.
2. Number of accounts/ cards: Most lending institutions, and credit rating organizations, want to see, no more than, approximately, 4 to 6 accounts. Each of these must be, in accordance with the discussion about balances, discussed above.
3. Debt: Closely examine, and consider, how the balances on your credit cards, when added to, other personal, and/ or consumer loans, such as car payments, lines of credit, etc, relate to your income. Mortgage lenders have strict requirements, for both the ratio of mortgage debt, to income, as well as total debt, to income. Unless, you qualify in both areas, conventional mortgages, may be, extremely difficult and challenging, to achieve, and receive. Another issue, is to consider, your personal comfort zone, and how credit card debt, and monthly payments, might create added stresses and hassles.
4. Recent accounts opened: If you are planning on buying a home, in the somewhat, near future, it is essential to avoid adding any additional debt, to your existing debts. In my, well over a decade, as a Real Estate Licensed Salesperson, in the State of New York, I have witnessed, far too many instances, where individuals, hurt and/ or destroyed their chances, and/ or opportunities, by accepting some credit card offer, because of some perceived benefit. For example, when you are buying something, at a retail store, resist opening a charge card, with that store, because the short – term benefit, might, potentially, have negative ramifications.
Smart consumers proceed, in a prepared way, in order to make their home buying, experience, smoother, and better. Manage credit card accounts wisely, and be prepared!