February 28, 2022
Getting your credit ready for a home loan application is one of the most important steps in the mortgage planning process. Do you know how to get your credit prepared before the lender pulls your reports and reviews your FICO scores?
The first key to doing this right is time. Give yourself at least a year to save and plan for your mortgage. This also gives you enough time to work on your credit and lower the amount of monthly debt you carry.
Lowering the balances on your credit cards not only improves your debt ratio, it also potentially enhances your credit card utilization ratio, too.
A year of on-time, every time payments for all financial obligations is strongly recommended. This is the most basic credit repair advice you’ll find on the Internet. What’s not so basic? Paying on time is greatly enhanced by paying down more each month. You want to reduce your monthly debt as much as possible.
Some people choose to do this in different ways. There’s the “snowball” approach where you pay off your smallest debts first and work your way up to the biggest balance.
Another approach to pay the minimum on all balances except your highest-interest rate account. There are many such strategies, not all are right for all house hunters, but it’s important to find the right one for you.
While you are working on your credit, you will also want to review your credit reports for errors and signs of identity theft.
And it is not enough these days just to monitor your credit manually. It pays to use a credit monitoring service to provide you with automatic updates keeping you informed in the most up-to-date ways possible.
When you begin your homeownership journey it is also helpful to be careful about your private data. Be more careful than usual since you will be dealing with unknown third parties who will ask you for private information.
Change your passwords more often than you normally do, don’t respond to unsolicited emails, and be careful not to give your private data to just ANYONE.
Preparing for your home loan means doing some homework and not just on your credit. It is smart to research where you want to live in terms of issues like natural disasters, seasonal allergies, tourist season traffic and population, etc.
The fewer surprises you encounter as a new homeowner, the better. That includes knowing about planned major developments in the area near your home, highway renovation, or even airport expansion projects depending on location.
It’s true that there is a lot to do when getting ready to buy a house. That’s one reason why giving yourself a year or more to prepare is a smart move. The less rushed you feel once the process begins, the better.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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