Keep your credit card balance as low as possible. Usually, the best practice is to keep your monthly payment below 5% of your yearly income. How you can calculate this ?

Step 1  Divide your total income by 12

If your yearly income is 120K , divide it by 12 that comes to  12,000 a month.

Step 2 Find out the 5% of your monthly income. Multiply your income by .05 . So 12,000 x .05 =600. 

Step 3 your monthly payment should not be more than 600 a month. This 600 is the minimum payment of your credit cards’ unpaid balance. Now, to find out what should be the maximum unpaid balance of all your credit cards combined, you just need to divide the result from step 2 by .03 or 3%.  So, if you divide 600 by .03 , the result is 20,000.

So, we have learned that if your income is 120k yearly , your credit card  monthly payment should not exceed more than 600 a month  and in order to this your combined credit cards' total balance should not exceed 20,000 . If you can even keep it lower than 5% , it is even better, because lower debts mean you can qualify for more.

Please keep in mind these formulas stated above are not the same for every borrower. This is just to give you an idea of how it works. Here we have used 5% of the total income. It would vary depending on your monthly mortgage payment  and other debts.  The more income you have the more you can spend towards your debts as long as your monthly payments (principal, interest, taxes, insurance) and your total debt payment do not exceed the threshold of the particular mortgage product depending on the purchase price or the market value of the subject property.

When you are in the market to buy a property , your credit is very important. You should avoid doing few things in order to make sure that underwriters do not deny you at the last moment.  Pay attention to the following matters, if applicable:

1.  Do not take any new personal loans

2. Do not buy a new car 

3. Do not do anything that might affect your credit negatively

5. Maintaining or improving your credit is important. So, keep track of your credit cards usage. The less debt you have is better for you. If you have to take a loan or apply for a new credit card when you are in the middle of the loan approval process , it is very important that you consult with your loan officer .

Changing your job without a valid reason might be a problem. Discuss with your loan officer before your make a change. Usually, if you change your job because you are getting higher salaries in the same line of work, it might not be an issue. 

Sometimes it depends on you are on what stage of the loan application.  If you have your closing scheduled in about a week, it is never a good idea to change your job , if you have an option.  It might raise a red flag.

As every scenario is different having a conversation with your loan consultant might be a good idea. Underwriters do not like a job change in a different field or a different line of work, especially, when you are in the middle of the loan commitment process.

Also if your earnings go lower it might not be good for your approval. For example, if you work full time and then you lose hours and work only 20 hours a week, it might make you disqualified. Just because you have got the loan approval does not mean you can quit your job or work part time. To keep your approval valid you need to keep maintain your job status in order to remain qualified.

If someone gets a promotion that is different. A positive cash flow from the same work is always good for a borrower. If you have to change a job because it is a great opportunity for you or you had an accepted job offer from an earlier time, you should discuss the matter with your lender.