If you're contemplating buying a home, you're probably thinking about how you're going to qualify for a home loan. We all know the things we need to do to clean up our credit scores - pay our bills on time, don't borrow more than we can afford, etc. The only problem is that it takes time to improve your credit score with this plan. Right now home prices are low and more importantly, interest rates are extremely low. But what if your credit isn't spectacular right now? How can you improve the situation so you can buy a home before interest rates rise?
Of course you should embark on your long-term credit improvement plan. Make sure you pay all your payments on time, don't buy things you can't afford, etc. If you're hoping to buy a home in the very near future, though, you can improve your credit using some of these quick fixes, hopefully in time to buy soon.
Get a copy of your credit report and address any errors. You probably see ads all the time for credit watch services that will get your credit report for you, but it's easy and free to do it yourself. The three credit reporting agencies, Transunion, Equifax and Experian are required to give you a copy of your credit report. Just go to their websites and request a copy. Look it over and get any errors corrected. It's important to do this with all three, because you never know which service a lender is going to use. Many of them now order all three reports.
Sometimes there will be problems on your credit report that are accurate because you really did default on a loan or make some late payments. If this is the case, a letter of explanation is in order. If you can tell a lender why you had a financial problem, what you did to correct it and why it's unlikely to happen again, your loan is more likely to be approved.
Impose a temporary moratorium on borrowing. Don't buy that car or charge things to your credit card. The lending requirements for mortgages are more stringent that those for other types of loans. You can buy a car after you close on your home. Your monthly debt obligations are part of the calculation that limits the amount of the home loan. Typically the maximum monthly debt payments, including the costs of the mortgage and other home related expenses is about 45% of your gross income. If you get any new loans before you get a home loan, those monthly obligations will eat into the 45%, so the loan amount you can get will be lower.
Paying down debt is an excellent long term strategy. Paying down loans that are nearing the end of their term is a great short term strategy. Remember that 45% number we mentioned? Usually lenders don't include obligations that have less than 10 months to go. Any loans that can be brought down enough to have less than 10 months of payments are prime candidates. Credit cards should be at the top of this list, especially if you are near your credit limit.
The typical home buyer want to get the best house he can possibly afford. These steps will maximize the monthly payment you can get approved for, so you'll be able to buy a home that you can live in for a number of years. Start working on this as soon as you possibly can. By the time you apply for a home loan, your efforts will already be evident.
Of course you should embark on your long-term credit improvement plan. Make sure you pay all your payments on time, don't buy things you can't afford, etc. If you're hoping to buy a home in the very near future, though, you can improve your credit using some of these quick fixes, hopefully in time to buy soon.
Get a copy of your credit report and address any errors. You probably see ads all the time for credit watch services that will get your credit report for you, but it's easy and free to do it yourself. The three credit reporting agencies, Transunion, Equifax and Experian are required to give you a copy of your credit report. Just go to their websites and request a copy. Look it over and get any errors corrected. It's important to do this with all three, because you never know which service a lender is going to use. Many of them now order all three reports.
Sometimes there will be problems on your credit report that are accurate because you really did default on a loan or make some late payments. If this is the case, a letter of explanation is in order. If you can tell a lender why you had a financial problem, what you did to correct it and why it's unlikely to happen again, your loan is more likely to be approved.
Impose a temporary moratorium on borrowing. Don't buy that car or charge things to your credit card. The lending requirements for mortgages are more stringent that those for other types of loans. You can buy a car after you close on your home. Your monthly debt obligations are part of the calculation that limits the amount of the home loan. Typically the maximum monthly debt payments, including the costs of the mortgage and other home related expenses is about 45% of your gross income. If you get any new loans before you get a home loan, those monthly obligations will eat into the 45%, so the loan amount you can get will be lower.
Paying down debt is an excellent long term strategy. Paying down loans that are nearing the end of their term is a great short term strategy. Remember that 45% number we mentioned? Usually lenders don't include obligations that have less than 10 months to go. Any loans that can be brought down enough to have less than 10 months of payments are prime candidates. Credit cards should be at the top of this list, especially if you are near your credit limit.
The typical home buyer want to get the best house he can possibly afford. These steps will maximize the monthly payment you can get approved for, so you'll be able to buy a home that you can live in for a number of years. Start working on this as soon as you possibly can. By the time you apply for a home loan, your efforts will already be evident.
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While you're getting everything in order to qualify for a home loan, you can go house shopping! Check out these new homes in San Marcos, California.
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