Credit Preparation Tips & Tricks
Looking to buy a New Home? One of the most important factors is preparing your credit. Below are a few steps to prepare to buy a new home.
1. Check your credit report: Before you even apply for a loan you should know your credit score. You can get one free report per year. You can review your score, and if you find any mistakes, you can dispute them. If you have bad credit, you can work on repairing it before you start mortgage shopping.
2. Make payments on time: Your report shows your current creditors and your payment history. Payment history is one of the most important components of your score. Avoid making late payments at any expense.
3. Pay down high balances: Even if you pay your debt on time, lenders will also focus on how much credit you have available. If you have credit cards that are maxed out or close to the limit try to pay them down to at least 35% of your limit. This can greatly increase your credit score.
4. Do not open new accounts: Opening new accounts before applying for a mortgage can be a red flag. Creditors want to see a history of payments, and new accounts mean you have a new need for credit. The only exception to this would be if you do not have any credit yet. Just avoid making any large purchases before applying for a loan.
5. Do not make Employment Changes: If you have any control over this do not switch jobs before or during the process of obtaining a mortgage. Lender’s like to see stability for at least a year or two before applying for a mortgage.
If you take these steps prior to trying to obtain a mortgage you can improve your credit score which will lead to a better rate and term for your mortgage. Ultimately, this could mean a huge savings over the lifetime of your loan.