Between the pandemic, the limited inventory, and rates at very lower levels, 2021 is and continues to be a challenging year for people buying a home. Because of the rise in home prices, many buyers waited too long to buy a home and have simply been priced out of the market. Despite these challenges, 2022 is possibly going to be an easier year for people that are both buying and/or refinancing a home. If you are looking for cash flow, strike now, while the iron is hot because of the myriad of changes that are afoot, beginning on January 1st.
I have been writing lately about the need for many people to cash out some of the equity in their homes to pay off high-interest credit card debt, installment loans, and mortgage debts as well. With the increase in conforming, conventional loan limits, this is the time to secure cash out in time for the holidays. As a former loan officer, I can tell you that right after the holidays were over and people started to receive their credit card bills, our phones in the office would ring off the wall because people needed to keep their monthly payments low and even get cash out for savings. 2021 is no different. There are some things that you need to do NOW so that when you buy that better home or cash out some of that equity, qualifying will be an easier process as will processing, underwriting, and closing. The loan officers at 7th Level Mortgage have been specially trained in this area and will conduct you through the process with knowledge and professionalism from start to finish.
- Credit Reports, Scores, and Reviews: You must check your credit reports (all 3), and scores. You need to review them and look for errors, incorrect information, and possible items that could indicate someone tried to commit fraud using your social security number, address, and even your name. Failing to do this periodic review, could cost you the ability to qualify for a mortgage. It will also give you a picture of your credit utilization of the credit you already have. You should go through your Credit Card Company or bank to avoid paying for this report. Because the minimum credit score to qualify for an FNMA/FHLMC conforming conventional loan (580 to qualify for an FHA loan) you should not be satisfied with just meeting those minimums. You would be in a better position in attempting to obtain a lower rate with higher scores. Long before applying for a loan, any derogatory or erroneous information on the report or delinquencies you may currently need to be addressed NOW because lenders are more likely to grant credit to people that are working on repairing their credit than those that aren’t.
- Pay off Debt: Your debt-to-income ratios must be in conformation with the lender’s requirements. This ratio is a measurement 1of the amount of debt you have and are paying, relative to your gross monthly income. Since 2021, was such a tough year to qualify for a mortgage loan, and if you are looking to purchase a new home or cash out equity by availing yourself of the higher loan limits, you may need to do some “house cleaning” in terms of paying off some of the debt load to aid in qualifying for the new loan. When you have paid off some of the credit card and other monthly debts you are carrying, your credit score may receive a boost and thus, qualifying would be easier.
- How about a Side Hustle?: Some people may want to buy a bigger home or cash out equity, but their income doesn’t quite allow them to qualify. You should consider obtaining a side job, (preferably in the same line of work) that is consistent and possibly long-term. Finding work in the same or similar occupation will bring down your DTI and the lender will look more favorably on your application.
Finally, rates are at multi-decade lows, while loan limits are jumping to 50-year highs. This will not and cannot last forever. If you follow the steps I just outlined and call 7th Level Mortgage today, 2022 will be a brighter and happier year for you and your families.
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