Getting Started
When you are about to start you endeavor to purchase a home. You will want to get your expenses under control.
Usually when you have a car or student there is not much you can do. But when it comes to your credit cards, its another story. Focus on paying the ones with a larger monthly payment. If you can get rid of smaller ones and bring them to zero that may be the way to go. Try to lower you income-to-debt ration since it can make it impossible to obtain a loan if its too high.
You ideally want to have as little as possible debt upto 45 day prior to scheduling your appointment with your loan officer.
Start working on you credit early on
- Set priorities and pay down/off your credit cards. At least 45 prior to scheduling your meeting.
- Avoid new credit inquiries. Wait until your purchase is completed before applying for new credit. That lawnmower that you need to have to mow your new home can wait to be purchase after you purchase your home.
- Collections or derogatory credit. Make sure you are not behind in any payments or reported with collections, since those would have to be paid at closing.
When you optimize your credit, you will have a higher score which in lending can open doors when it comes to different programs and better rates.
- Loan Programs.There are many programs in the lending world. But most of them require a minimum score in order to qualify for them.
- Loan Interest Rates. The higher the score the better your interest rate will be.
- Avoid additional Limitations. When your credit score is closer to the minimum requirements underwriter may ask to compensate the score by lowering the Debt-To-Income rate by 5 or 10 percentage points. This may end up kicking you out of the loan program.
Lowering your balances on your credit cards will help your score. We recommend using any available tools in the market today which gives you free advice and scenarios of what -if for paying down a specific credit card.
- Owe less. When your balance falls below 30% on you credit card is usually better.
- Over all credit. When trying to maximize your score, remember that you total debt vs. your total credit credit should be below 30% as well.
- No new credit card deals until after you close. Every inquiry you make using your credit will impact your score for 2 years. Think before applying to credit.