Planning to Buy a Home? Here’s What Actually Matters.

By Stephan Wiederkehr | Finance West Lending

A lot of people assume they need perfect credit and spotless finances to buy a home. Others wake up one morning ready to buy — and realize they hadn’t thought through what’s actually involved.

What’s usually missing is a basic understanding of how a mortgage gets approved and a plan to maximize what you can afford. The good news? Most of it is in your control.

Whether you’re actively looking or just keeping it in the back of your mind, here’s what matters:

1. Income — especially the “extra” parts

Bonuses, commissions, and overtime all count — and they count a lot. But lenders average the extra portion of your income over 24+ months, so a short burst of overtime before buying won’t move the needle. If you’re planning ahead, building consistent supplemental income over the next 24 months is genuinely worth the effort.

On the flip side, if you got a promotion yesterday and your base pay went up, we can use that income immediately — no waiting required.

2. Self-employed? Think about taxes before you file

Writing everything off feels smart — until you’re trying to qualify for a mortgage. There is no “wink-wink-everybody-does-it” kind of thing.

Every self-employed person should have a Health Savings Account and a SEP IRA. They reduce your tax liability without hurting your income qualification. Depreciation is another underused tool: it lowers your taxes, but we add it back as income when qualifying you. Win-win.

Talk to your CPA about your goals — for both your business and any income properties — and make a plan before you file.

There are also alternative loan programs for self-employed buyers, though they typically come with higher rates and larger down payment requirements.

3. Target the right debt first

Debt-to-income ratio is the key metric lenders use. Pay down credit cards and auto loans first.

If a new car is on your wish list, it might be worth waiting. A friend of mine recently got a big promotion and rewarded himself with a sports car. It reduced his home affordability by $200,000. Buy the house first, then the car.

4. Down payment — more sources than you think

It doesn’t all have to come from savings.

• Family gift funds are allowed on most loan programs.
• 401(k) loans are another good option — and since you’re borrowing your own money, they don’t count against your debt-to-income ratio.

5. Your credit report — pull it and own it

A $50 collection hits your score just as hard as a $5,000 one. Collections don’t go away on their own; the agency keeps reporting them month after month. Here’s how to deal with them:

• Settlements: Contact the collection company and negotiate. Get a letter confirming it’s paid — they sometimes resurface months later, and that letter is your proof. Ask for a goodwill removal of the negative mark, or better yet, a letter stating it was reported in error. That removes it entirely.
• Utilization: Keep balances below 30% of your credit limit. If you can’t pay it down, ask for a limit increase. If your limit is $500 with $400 owed, a bump to $1,500 dramatically improves your ratio.
• Errors: Dispute them. Bureaus are required to investigate. Contact Equifax, Experian, and TransUnion directly — or I can send you their contact info.
• Old cards: Don’t close them. It goes against common sense, but no credit history is almost as bad as bad credit.

None of this is complicated. It just helps to have someone look at your actual numbers and tell you what would make the biggest difference — and in what order.

If you’d like to talk through your situation, I’m happy to help. No forms, no commitment — just a straightforward conversation.