Make These Moves Now if You’re Planning to Sign a Mortgage in 2024

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Hoping to finance a home purchase in the new year? Read on for some key moves to make. 

If you’re aiming to buy a home in the new year, then chances are, you’re going to need a mortgage — unless, of course, you somehow have hundreds of thousands of dollars in cash just sitting in the bank waiting. But assuming you are looking to sign a mortgage in 2024, the moves you make in the coming weeks could increase your chances of not only getting approved, but snagging a more competitive interest rate on your home loan. Here are three in particular worth focusing on.

1. Check your credit score

The higher your credit score, the more likely you are to get approved to borrow for a home purchase. A higher credit score could also mean snagging a lower interest rate on your mortgage, and getting to enjoy monthly savings.

According to myFICO, if you apply for a 30-year, $300,000 mortgage with a FICO® Score of 640 to 659, you might qualify for an interest rate of 7.580%, leaving you with a monthly payment of $2,114. But with a credit score of 660 to 679, you might snag that mortgage at 7.150%, leaving you with a monthly payment of $2,026. That’s a difference of $88 a month, or $1,056 a year.

If your credit score is in the upper 700s or higher, then you may not need to push yourself to boost it. A score like that is likely to lead to a favorable borrowing rate. Otherwise, you can raise your credit score by paying all bills on time, whittling down credit card debt, and correcting errors on your credit report, if applicable.

2. Pay down existing debt

Mortgage lenders will look at your debt-to-income ratio when determining whether you qualify to borrow for a home. The less debt you have relative to your income, the better your chances of getting approved.

Assess your current debts and see if it’s possible to reduce your load. Your best bet is to focus on credit card balances first, since paying off that specific type of debt could help your credit score improve, whereas paying off something like an auto loan may not actually help your credit score. (In fact, believe it or not, paying off a long-standing installment loan like that might cause your credit score to drop a bit.)

3. Fight for a raise at work

Homes are expensive these days, so it might take a larger mortgage to buy one. The higher your income, the more likely you are to be able to borrow the amount you need.

Meanwhile, at this point of the year, many companies are finalizing their financial plans for 2024. If you haven’t received word that you’ll be getting a raise for the new year, schedule a meeting with your manager and fight for one. Point to the various tasks you’ve accomplished this past year and the additional responsibilities you’ve taken on.

And if your manager isn’t looking to raise your pay based on that, see if there’s a higher-level position within your company that you can apply for. It might take a promotion to land a pay raise, but if you’re qualified to climb the ranks, you might as well go for it.

The moves you make in the near term could spell the difference between being able to buy a home in 2024 or not. In addition to these “must do” moves, here’s one thing not to do between now and your mortgage application — apply for a new loan or credit card.

Doing so could not only ding your credit score slightly, but also send the message that you’re someone who needs to borrow money for non-housing purposes. And when you’re asking for what could be a multi-hundred-thousand-dollar loan, that’s not a message you want to convey.

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