San Diego home prices are at a record high, with the median home selling for nearly $580K, and millennials all over the country are getting creative—often taking second jobs or selling their Bitcoin to afford a down payment. According to real estate company Redfin—who graciously provided all the source material for this article—50% of millennial homebuyers’ are most concerned about having enough money for a down payment. Other concerns include affordability in a desirable location (45%), and increased competition for bidding wars (28%). Before you get discouraged, it’s important to talk to a lender and get pre-approved for a home loan. A good lender like Transparent Mortgage will take into consideration your credit score, transaction history, employment history, and other factors to determine how much house you can afford. If you are thinking of buying a home, you will want to take these steps to get pre-approved before entering a competitive home-buying market.
Establish Your Credit Score
Credit score is one of the first things lenders look at when deciding whether to approve a loan. It’s crucial to build and maintain a good credit score—typically considered in the high 600s to 700s. Lenders have different criteria for minimum credit score, but they want to see a solid history of paying bills consistently and on time. To ensure your credit score stays high, make sure to:
- Keep track on all your monthly accounts and make sure you end with a balance of zero
- Set up automatic bill payments to ensure your accounts are paid on time
- Regularly check to make sure you don’t have any accounts in collections that could negatively affect your score
Studies show millennials actually have relatively high credit scores, especially in coastal cities like San Diego. If your credit score is low, you can improve it over time (and make sure it isn’t further negatively impacted!) by following these tips.
Leave a Paper Trail
In order to get a holistic picture of your financial situation, lenders want to see records of your expenses and income, including direct deposits, payments, spending, etc. Try to avoid paying solely in cash transactions—use a credit or debit card, checks, or other means of payment that leave a tangible record.
Don’t Quit Your Job
Lenders want to see a two-year work history to validate your employment. If you’ve been at the same company with a consistent schedule for two years, that looks great on a mortgage application. Red flags for lenders include many rapid, consecutive job changes over a short period of time, moving from full-time to part-time, or going from salary to commission. If you change jobs but remain in the same line of work, or receive a raise or bonus, lenders tend to view that favorably. Reliable work history will help ensure you qualify for a home loan.
The pre-approval process involves meeting with a lender to determine – based on credit score, work history, and income – how much house you can truly afford. Pre-approval is basically a requirement if you want to be competitive among other offers in a tight market, as it guarantees to the seller you have the funds to close the sale.
The housing market in San Diego is hot, but before you sell your Bitcoin to finance a down payment, make sure you follow these steps to set yourself up for success. Whether you plan to buy a house in two years or ten, these tips will help you afford your dream home – within your budget. Happy house hunting!
To get started on your home loan pre-approval process with Transparent Mortgage, call us today at (619) 929-0199.