The first step of your homebuying journey should be getting pre-approved, so you can confidently begin house hunting knowing exactly what you can afford.

This not only makes the homebuying process easier, but it also increases your chances of closing the deal on your dream home! Real estate agents will be more motivated to work with you and sellers will be excited by your offer, knowing that your funding is already approved.

When you begin the pre-approval process, your loan officer will consider many variables.

But two key factors can have the highest impact on your pre-approval odds: your income and your credit score.

1. Your income 

A higher income can result in a larger pre approval amount because you have more money to cover your monthly expenses and debts.

Many borrowers who are W-2 employees or on a fixed income may have few options for increasing their monthly income. But it helps to ensure you include all sources of income you may receive outside of your monthly paychecks. 

These include alimony, child support, disability income, VA benefits, retirement, side hustles and bonuses.

Any compensation you receive may be eligible to include as income on your application.

2. Your credit score

For some people, their credit score can be a very high place of leverage for increasing their pre-approval odds. Because an applicant with a solid credit score and a stable income is more attractive to lenders than a high-income applicant with a rocky credit history.

So, what do lenders look for in a credit profile?

• Payment History (35%): Do you have a proven track record of making your payments on time?
• Amount Owed (30%): Are your credit cards maxed out, or are you frugal with your credit use?
• Length of Credit History (15%): Are your accounts mature and in good standing?
• Types of Credit (10%): Do you have a healthy mix of loan types? (Credit cards, vehicles, personal loans, etc)
• New Credit (10%): Have you recently applied for lots of new credit?

You've got this! 

By remembering those credit-scoring factors, you can devise a game plan for improving your credit.

Are your credit cards maxed out? Paying those loans down could be a good idea.

Have you missed some payments lately? Consider doubling down on paying on time.

In the end, there's a lot to understanding credit and even more to getting your credit homebuying ready. But with some dedication and a little hard work, you could see a dramatic change in your credit score!