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Buying a Home in 2020 Depends on Your Financial Health Habits

If home-buying is on your radar in 2020, it should be more than a passing thought. Unlike previous years when you may have made a snap decision to buy a car or take a trip, you should be preparing for it with nearly every financial decision you make.

"Employment history and income are two of the biggest factors lenders look at when evaluating a mortgage application. A new job may be a good career move, but if you plan to buy a home in the new year, know that job-hopping can be a red flag to some underwriters — especially if you're moving to a different industry. If you're looking around for something new, keep those plans for after you close escrow on a home. Job stability is king with lenders, who will also scrutinize any gaps in employment over the past two years.

They must feel you are an excellent risk before approving your loan. If, however, you make an employment change after applying for a loan, let your lender know ASAP, as they will need extra documentation. Verifications for reserve funds, employment status, and a credit check are usually done at the beginning of the loan application process as well as at the end, so it's best to freeze everything in time if possible. Lenders like steady, predictable paychecks.

As you prepare for a home purchase, consider checking your credit score as if you're checking the scale while on a diet since your credit score can have a significant impact on your ability to buy a home. The lower the score, the higher the interest rate that might be available to you. "Just a few percentage point differences in an interest rate can cost you thousands over the life of a loan. Monitor your credit closely, especially for fraudulent activity, to prevent any surprises that could delay the loan application process.