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How to Build Credit For a Mortgage Starting This National Homeownership Month

June 19, 2025 by Kay Monigold

June is National Homeownership Month, a time to celebrate the dream of owning a home and offer guidance to those preparing to take that important step. One of the most impactful things you can do right now is to begin building or improving your credit. If you plan to purchase a home in the next 6 to 12 months, the work you do today could make a major difference in the loan terms you receive later.

Check your credit report first. Before anything else, it is important to know where you stand. You can access your credit reports for free at AnnualCreditReport.com. Review them carefully for any errors or outdated information. Disputing mistakes, like incorrect late payment or a paid-off account still listed as open, can quickly improve your score. Knowing what is on your report also gives you a starting point to track your progress.

Prioritize on-time payments. Your payment history makes up the largest portion of your credit score. Even a single missed payment can significantly lower your score and stay on your report for years. Set reminders or use auto-pay features to ensure you never miss a due date. If you are behind on any bills, getting caught up and staying current will help your credit rebound over time.

Manage your credit utilization. This refers to how much of your available credit you are using at any given time. Keeping your usage under 30 percent of your total credit limit shows lenders that you are using credit responsibly. If you are carrying balances on your credit cards, paying them down can make a quick and measurable impact on your score.

Consider building new credit responsibly. If your credit history is thin, opening a secured credit card or becoming an authorized user on a trusted family member’s account can help. Just be sure any new accounts are used wisely. Keep balances low and make all payments on time. Avoid opening too many new lines of credit at once, as this can temporarily reduce your score due to multiple hard inquiries.

Avoid making big financial changes too close to applying for a mortgage. Taking on a large new loan or suddenly closing older credit cards can shift your credit profile in ways that could be harmful. Lenders like to see consistency. Keeping your financial behavior steady and predictable in the months before applying for a mortgage is a smart move.

Use National Homeownership Month as your motivation to take action. This month is about more than just recognizing current homeowners. It is about helping future buyers like you start the journey with confidence. Whether you are six months or a year away from applying for a mortgage, building credit now puts you in a stronger position.

If you have questions or want help reviewing your credit situation, we are here to support you. Let’s turn this month into the beginning of your path to homeownership.

Filed Under: Homeowner Tips Tagged With: Build Your Credit, First Time Home Buyer, Home Buying Goals

The Pros and Cons of Using Gift Funds for Down Payments

April 22, 2025 by Kay Monigold

For many homebuyers, especially first-time buyers, saving for a down payment can be one of the biggest hurdles to homeownership. Fortunately, gift funds, money given by family members, close relative, or even an employer can help bridge the financial gap. While using gift funds can make homeownership more attainable, there are important benefits and potential drawbacks to consider before relying on them.

Pros of Using Gift Funds for a Down Payment

Easier Path to Homeownership
One of the biggest advantages of using gift funds is that they allow buyers to purchase a home sooner rather than waiting years to save enough money. This is particularly beneficial in competitive housing markets where home prices are steadily rising.

Lower Loan Costs
A larger down payment, thanks to gift funds, can help buyers qualify for better mortgage terms, including a lower interest rate. Additionally, if the gift enables the buyer to put down 20 percent or more, they can avoid private mortgage insurance (PMI), which can save hundreds of dollars per month.

More Financial Flexibility
By using gifted funds, buyers can preserve their own savings for other home-related expenses, such as closing costs, moving expenses, and future maintenance. This financial cushion can make homeownership less stressful in the long run.

Less Loan Debt
With a larger down payment, buyers may borrow less, resulting in lower monthly mortgage payments. This reduces overall interest costs over the life of the loan, making homeownership more affordable.

Cons of Using Gift Funds for a Down Payment

Strict Lender Guidelines
Not all mortgage programs allow gift funds, and those that do often have strict rules about how they can be used. Lenders typically require a gift letter from the donor stating that the funds are a true gift not a loan that must be repaid. In some cases, lenders may also require bank statements from the donor to verify the source of the funds.

Potential Tax Implications
While buyers do not have to pay taxes on gift funds, the donor may face tax consequences. In 2024, the IRS allows individuals to gift up to $18,000 per person per year without triggering a gift tax. If the gift exceeds this amount, the donor may need to file a gift tax return and use part of their lifetime exemption.

Limited Control Over Timing
If the donor experiences financial hardship or delays in transferring the funds, it could hold up the homebuying process. Buyers should ensure that gift funds are available before making an offer to avoid last-minute issues.

May Impact Mortgage Approval
Some loan programs, particularly FHA and VA loans, have stricter rules regarding gift funds. Buyers may need to contribute a portion of their own money, especially if they have a lower credit score. Lenders may also scrutinize large deposits in the buyer s account, requiring detailed documentation.

Gift funds can be a powerful tool to help buyers achieve homeownership faster and more affordably. However, it is crucial to understand lender requirements, tax implications, and potential challenges before relying on them. Working with a loan originator can help navigate the process smoothly, ensuring compliance with lender guidelines and avoiding unexpected hurdles.

If you are considering using gift funds for your down payment, consult with a mortgage professional to explore your options and determine the best path toward homeownership.

Filed Under: Homeowner Tips Tagged With: Down Payments, First Time Buyer, Homeownership

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Our Team

Kay MonigoldKay Monigold
Owner/Mortgage Broker/Residential Mortgage Loan Originator
NMLS#1086176

Steven LoweSteven P Lowe, Sr
Residential Mortgage Loan Originator
NMLS #1085638

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