6 New Year's Resolutions for Homebuyers

Are you thinking about buying a new home in 2022?

Then check out some New Year's resolutions that will help you stay on the right path and improve your homebuying luck.

1. Avoid Big Purchases

Your first new years' resolution is to avoid big purchases.

Taking on large amounts of debt from vacations or vehicles is a great way to sabotage your ability to buy a home.

Avoid making large purchases that cut into your savings for a down payment or put you into debt.

Think about your debt-to-income ratio (how much you earn vs spend) as it has a major impact on how much money the financial institution will loan you.

2. Tackle Your Debts

Second, in this new year, you will want to tackle your debts. Try and pay down as much debt as possible and try and keep your interest rates low.

The more financially fit you are the better you will qualify for a home loan.

Don't be fooled into taking on credit card or store credit lines that charge extremely high interest rates, this won't help your case at all! There are many philosophies for ridding yourself of debt, but the fact is, you will need to take action.

3. Establish a great credit history

Third, work towards establishing a great credit history. If you don't pay your debts off on time, like credit cards, student loans, or phone bills, then your lender is going to question your ability to pay your mortgage.

Your credit history could show that you are a responsible borrower if you pay your debts back on time. But they could also show you are a risk if you have too many credit cards, too much credit card debt and miss payments. Homebuyers should aim to improve their credit scores.

The credit score is the currency of trust and reliability for lenders. It has a big impact on your homebuying power. When your credit score is low, the lender will not be willing to lend you as much as if it were high and it will impact your interest rate.

Since mortgages are so large, even a few percentage point differences could translate to extra thousands of dollars out of your wallet over the loan's lifespan.

4. Limit job-hopping

Remember, the lender's main concern is to recoup the loan they gave you. Having steady employment with fewer gaps over the past few years puts the minds of lenders more at ease. Lenders may look at how many jobs you've had over a period of time and may see constant job-hopping as a big red flag.

Steady work gives a much better forecast of your income future, meaning less risk for the financial lender. Moving from an hourly job to a salaried job with equal or more compensation may help your application.

5. Cut down on excess spending

Don't get dinged for high credit card use! Using the card too much can have a negative effect even if the card gets paid off every month. The reason is that your credit utilization ratio is a big factor in your credit score calculation. This number is calculated by dividing your total credit card balances by your total credit limit. Try to keep this number below 30% to maintain a good credit score.

If you have Netflix, Amazon Prime, Crave & Disney Plus, or any of the monthly gift boxes to yourself, you may be cutting into your savings and it may be having a negative impact on your credit score. Find places where you might be mindlessly spending. Online banking apps can be extremely helpful by letting you view your spending habits and break them down by category.

6. Save More

This is a resolution that everyone can get behind. Start small by setting aside a small amount like $50 a week. You may be surprised how quickly your savings will add up.

If you've already been contributing to an RRSP, and are a first-time home buyer, individuals can use up to $35,000 of your RRSP to help finance your down payment on a home, while couples can use up to $70,000.

You could also automate savings to specific savings accounts or regularly make contributions to a tax-free savings account.

And if you haven't spoken with an financial investment company, financial planner or portfolio manager, you will be missing out on the growth and compound intere st that you simply don't get with banks.

In order to save the most though, you will definitely want to set a budget, which forces you to live within your means, while also setting goals for specific amounts you wish to save.