6 Ways To Get Your Credit Ready For A Mortgage
When you decide that it's time to buy a home, there are a few things you can do before you begin the home loan process that could increase your chances of getting the loan you want. These are simple steps that take only a little bit of preparation, however, the pay off could benefit you when it comes to applying for a mortgage. Here are six ways you can get your credit ready for a home loan, brought to you by your Lake of the Ozarks REALTOR:
1. Monitor Your Credit Score
Your credit score will likely be one of the most important aspects of the approval process. It's best to check your score ahead of time so you can estimate what kind of rates you may get and whether your credit is good enough to get you approved. If you need to raise your credit, you will know ahead of time so you can identify the areas of your credit history that need work and make steps to improve and regularly monitor your progress.
2. Pull Credit Reports
It's not uncommon for credit reports to have errors that could affect the overall credit scores. If your report does have errors, this could cause you to end up paying more loans. Don't let errors cause you to pay more than you should. Before you begin the hunt for a mortgage, make sure your credit report is free of any errors that could affect your score.
3. Pay Off Outstanding Accounts
Just like any other lender, mortgage underwriters want to ensure you're a reliable borrower who will make payments on time. This means that it's not a good idea to have outstanding or delinquent accounts on your credit report. Before you apply for a mortgage, consider paying off any outstanding accounts. Also, try to lessen the impact that late payments have on your score by burying them with month (or years) of timely payments.
4. Lower Credit Utilization
Mortgage lenders typically look at the amount of credit you are using, also known as credit utilization. While it's best to not be at your credit limit, it is also wise to avoid closing any credit accounts before getting a mortgage. While it might seem like the fewer accounts you have would make you appear more attractive to a lender, it could actually work against you. When you cancel an account, you could significantly reduce your available credit, which would cause your credit utilization to skyrocket and your score go down.
5. Reduce Debt-to-Income Ratio
In order to see if you are a good mortgage candidate, lenders could use your debt-to-income ratio, or the percentage of your income that goes towards paying debt, to evaluate how much additional debt you can handle and how much of a credit risk you pose. If you are already using most of your income to pay off debt, lenders may not trust that you'll make your mortgage payments on time and either decline your application or penalize you with high interests rates.
6. Hold Off Applying For More Credit
Since you want your credit score to be as high as possible, consider holding off on applying for more credit until after everything is finalized. Each credit application could potentially lower your score, so it's important to question whether you really need the extra credit right now or if it could wait.
A little preparation goes a long way. Once you decide to buy a home, it is wise to get your credit prepared for a mortgage. By the time you find the house of your dreams, everything should be ready to fall into place. I would love to put you into a new home at the Lake of the Ozarks. If you need help finding your new place at the Lake, give me a call at 573-216-8439.
1. Monitor Your Credit Score
Your credit score will likely be one of the most important aspects of the approval process. It's best to check your score ahead of time so you can estimate what kind of rates you may get and whether your credit is good enough to get you approved. If you need to raise your credit, you will know ahead of time so you can identify the areas of your credit history that need work and make steps to improve and regularly monitor your progress. 2. Pull Credit Reports
It's not uncommon for credit reports to have errors that could affect the overall credit scores. If your report does have errors, this could cause you to end up paying more loans. Don't let errors cause you to pay more than you should. Before you begin the hunt for a mortgage, make sure your credit report is free of any errors that could affect your score.
3. Pay Off Outstanding Accounts
Just like any other lender, mortgage underwriters want to ensure you're a reliable borrower who will make payments on time. This means that it's not a good idea to have outstanding or delinquent accounts on your credit report. Before you apply for a mortgage, consider paying off any outstanding accounts. Also, try to lessen the impact that late payments have on your score by burying them with month (or years) of timely payments.
4. Lower Credit Utilization
5. Reduce Debt-to-Income Ratio
In order to see if you are a good mortgage candidate, lenders could use your debt-to-income ratio, or the percentage of your income that goes towards paying debt, to evaluate how much additional debt you can handle and how much of a credit risk you pose. If you are already using most of your income to pay off debt, lenders may not trust that you'll make your mortgage payments on time and either decline your application or penalize you with high interests rates.
6. Hold Off Applying For More Credit
Since you want your credit score to be as high as possible, consider holding off on applying for more credit until after everything is finalized. Each credit application could potentially lower your score, so it's important to question whether you really need the extra credit right now or if it could wait.
A little preparation goes a long way. Once you decide to buy a home, it is wise to get your credit prepared for a mortgage. By the time you find the house of your dreams, everything should be ready to fall into place. I would love to put you into a new home at the Lake of the Ozarks. If you need help finding your new place at the Lake, give me a call at 573-216-8439.
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