A lot of emotions are involved when preparing to apply for your first mortgage, including excitement, apprehension, joy, and dread. If you do the necessary preparation before diving into the home-buying process, you will experience less stress and fewer concerns. Things have changed since your parents bought their first home, and it's important for the current generation of buyers to perform the necessary groundwork for a great buying experience.
Your credit report plays an important role. The moment the phrase "our own home" drifts through your mind is the time to start preparing. Unless you have perfect credit, the first step in the process is improvement. You are entitled to receive one free credit report annually from the major credit agencies. Requesting one report every four months allows you to monitor your credit all year. The following suggestions provide ways to clean up your credit history.
- Stop applying for new credit, and keep balances low and current on any credit cards you have. Be sure all payments are made on time.
- If you have store cards, charge small purchases only when necessary, make payments on time, and pay the full balance each month. Late payments and accounts turned over for collection have a negative impact on your credit score.
- Get rid of small "nuisance" balances spread over several cards. One of the considerations when your score is determined is the number of cards with balances. Pay off all the small balances, and just use one or two cards for all your credit purchases.
- Don't worry about good "old" credit on your report. It's beneficial for a potential lender to see good payment habits are practiced.
- Don't miss a single payment, and don't increase the amount you normally charge. Lenders like consistency, and they look at frequent habit changes as risky.
Get pre-approval before you go househunting. Talking with a mortgage broker to find out how much you can afford before you go househunting will keep you focused on shopping for homes within your price range.
If you follow these suggestions and prepare before you apply for a mortgage, buying a home for the first time doesn't have to be scary.