The future Bride and I are trying to figure out where we want to live. A big decision to be sure. Initially we planned to rent and it’s still a possibility. If a great apartment pops up we would certainly consider it. Presently we are exploring our options for buying. Having just completed the pre-approval process for a mortgage and I have come away with some observations.
- Don’t buy a new car – Two years ago I bought my car. It was a red 2012 Ford Focus, it gets 35mpg and I love it. The downside is that monthly car payment counts against my monthly income and reduces the size of the mortgage I can get. My old car was 7 years old and it had very high mileage, but I think it would have lasted 3 or 4 more years. If I knew then what I know now I would have waited. You can always buy a car after you get a house if you can afford to do so. If you cant then you are probably better off leasing or buying used or milking your current car for a few more years.
- Student loans are debt and nothing more – I’ve heard about the concept of good debt and bad debt. As far as I can tell the mortgage companies and banks view almost all debt the same. Any debt will reduce the amount of income you have and that will effect the size of the mortgage. Whats worse is that student loan debt is one of the only types of debt that cannot be erased with bankruptcy so in that regard it might actually be worse.
- Installment payments are worse then credit card debt – If you owed 3000 dollars in credit card debt or owned 3000 in a loan that you paid out in $275 monthly increments the loan is a bigger burden. Why? I’m not sure, I guess its because the credit card offers you more flexibility. I would advise against it but you could pay only 25 bucks a month to the credit card debt. With the loan you are locked into a set payment.
- Off the book jobs don’t count – If you work every friday nights waiting tables or parking cards and you bring in 300 dollars a week, but it’s not on the books then in the eyes of the bank it doesn’t exist. That $10,000 – $15,000 would greatly increase the size of the mortgage you can qualify for. You might want to try and get it on the books.
In the end the end its pretty simple, you want to show as much income as possible and eliminate all debt. In doing so you will probably raise your credit score and increase the chances of getting approved for a mortgage.