Strategy #1: Clean Up Credit Reports
Hopefully, you have a little time before you start planning your move because before you begin applying for a new home mortgage, you need to make sure your credit report is in great shape. You don't just want good credit; you want the best credit you can get. There are two reasons for this.
First, your lender is going to base a lot of his or her new home mortgage decision on your credit score which is based on calculations determined based on the information in the report. If you even want to be considered for a new home mortgage, your score needs to be above 600 in today's market. You might be able to squeak by with something in the 500 range but only if you have a sizable down payment and proof that you earn plenty to cover the mortgage.
Second, your credit score is going to determine your interest rate. The highest scores pay the lowest rates. If you have a credit score of around 750, you'll pay a lot less than someone with a score of 650.
Strategy #2: Be Ready to Prove Your Income
Even though you may be the most honest person in the world, that doesn't mean the lender is going to trust your information about your earnings. Instead, he or she is going to need documentation to support your claims before approving a new home mortgage.
That proof comes in two forms: your W-2s or pay stubs and your filed taxes. The lender will ask to see your last two years of tax forms. The income on these forms will be averaged to determine how much you are likely to make during the life of the new home mortgage. Unfortunately, if you don't report all of your income or if you had a bad year, this could hurt your chances.
Self-employed people face the biggest challenges because they cannot easily demonstrate the stability of their income. Having those tax forms available is essential but may not be enough to get you approved, especially if there is no one else contributing financially to the family full-time.
Strategy #3: Save Up for the Down Payment
One mistake many people make is borrowing the down payment for the home they want from a family member then explaining this to the lender. Most lenders see this as a bad sign. After all, the whole purpose of the down payment is to make sure you are financially able to pay the loan and so you'll have an investment to lose in case things go sour. If you want that new home mortgage, save up for the down payment yourself.