Mortgage Rules Are Changing

The year is winding down, and you are seriously considering the purchase of a new home or property in 2013. The question is how quickly do you wish to get your taxes done to serve your mortgage needs best? Will you be better off if you rush and get them done by Feb. 1 or would waiting until April 15 serve you better? The answers will be different for everyone, so let's look at a few scenarios.

Person number one was unemployed in 2010, but since then has found a lucrative job, and has seen great success in 2011/2012. It would be advantageous for this person to get their taxes done quickly as 2011 and 2012's returns will give them a stronger portfolio. A strong portfolio with good credit is an advantage when seeking a mortgage. Banks also like to see a minimum of two years of employment, so if you were rehired in early 2011 – you fit those criteria.

Person number two, on the other hand, had a terrific 2010/2011, so they want those numbers to show. Those people should apply for a mortgage in the early part of the year and cool their heels on their tax returns being completed. This way the only paperwork that the bank will see is the documents with the best numbers.

It's all about timing. Clearly, a consumer is seeking to put his/her best foot forward and a bank wants to grab onto people that pose little risk. It's not cheating, but rather smart strategy, to make your financial picture as bright as possible.

Another possible scenario, you are new to the job scene – perhaps a new graduate – and you are anxious to purchase your first home. If the second anniversary of your job is in April, wait until May to apply for a mortgage. That two year mark convinces banks that you are securely employed.

It's also important to time your other purchases around applying for a mortgage. For example, purchasing a new car, a college education or opening a new credit card within months of applying for a mortgage may ding your credit just enough to either take you out of the running for a mortgage completely, as the worst case scenario, or bump up your interest rate in the best case scenario. The more credit you apply for – the greater risk you appear to be.

Here's the bottom line if you want to set yourself up for mortgage approval in 2013. First, determine which two of the last three years will shed the best light upon your financial security and plan getting your taxes done accordingly.  Second, wait to apply until you've been employed for two years or longer and finally avoid opening other credit lines around the same time as applying for a mortgage. If you do these simple things, you will likely find yourself secure in your new home reading about something other than mortgage strategies by mid-2013.