Getting Ready
8 Ways to Improve Your Credit
Credit scores, along with your overall income
and debt, are a big factor in determining if you’ll qualify
for a loan and what loan terms you’ll be able to qualify
for.
1. Check for and correct errors in your credit
report. Mistakes happen, and you could be paying for someone else’s
poor financial management.
2. Pay down credit card bills. If possible, pay off the entire
balance every month. However, transferring credit card debt from
one card to another could lower your score.
3. Don’t charge your credit cards to the maximum limit.
4. Wait 12 months after credit difficulties to apply for a mortgage.
You’re penalized less for problems after a year.
5. Don’t purchase big-ticket items for your new home on
credit cards until after the loan is approved. The amounts will
add to your debt.
6. Don’t open new credit card accounts before applying for
a mortgage. Having too much available credit can lower your score.
7. Shop for mortgage rates all at once. Too many credit applications
can lower your score, but multiple inquiries from the same type
of lender are counted as one inquiry if submitted over a short
period of time.
8. Avoid finance companies. Even if you pay the loan on time,
the interest is high and it will probably be considered a sign
of poor credit management.
5 Factors That Decide Your Credit Score
Credit scores range between 200 and 800. Scores above 620 are
considered desirable for obtaining a mortgage. These factors will
affect your score.
1. Your payment history. Whether you paid credit card obligations
on time.
2. How much you owe. Owing a great deal of money on numerous accounts
can indicate that you are overextended.
3. The length of your credit history. In general, the longer the
better.
4. How much new credit you have. New credit, either installment
payments or new credit cards, are considered more risky, even
if you pay promptly.
5. The types of credit you use. Generally, it’s desirable
to have more than one type of credit—installment loans,
credit cards, and a mortgage, for example.
Tips on Buying in a Tight Market
Increase your chances of getting your dream house instead of losing
it to another buyer, with these easy steps.
1. Get prequalified for a mortgage. You’ll be able to make
a firm commitment to buy and make your offer more desirable to
the seller.
2. Stay in close touch with your real estate sales associate to
find out first about new listings that come on the market. And
be ready to go see a house as soon as it goes on the market.
3. Scout out new listings yourself. Look at Internet sites, newspaper
ads, and drive by the neighborhood frequently. Maybe you’ll
see a brand-new “for sale” sign before anyone else.
4. Be ready to make a decision. Spend lots of time in advance
deciding what you must have so you won’t be unsure when
you have the chance to make an offer.
5. Bid competitively. You may not want to start out offering the
absolute highest price you can afford, but don’t try to
go too low to get a deal. In a tight market, you’ll lose
out.
6. Keep contingencies to a minimum. Restrictions such as needing
to sell your home before you move or wanting to delay the closing
until a certain date can make your offer unappealing. In a tight
market, you’ll probably be able to sell your house rapidly.
Or talk to your lender about getting a bridge loan to cover both
mortgages for a short period.
7. Don’t get caught in a buying frenzy. Just because there’s
competition doesn’t mean you should just buy anything. And
even though you want to make your offer attractive, don’t
neglect inspections that help ensure that your house is sound.
10 Steps to Prepare for Homeownership
1. Decide how much home you can afford. Generally, you can afford
a home equal in value to between two and three times your gross
income.
2. Develop a wish list of what you’d like your home to have.
Then prioritize the features on your list.
3. Select three or four neighborhoods you’d like to live
in. Consider items such as schools, recreational facilities, area
expansion plans, and safety.
4. Determine if you have enough saved to cover your downpayment
and closing costs. Closing costs, including taxes, attorney’s
fee, and transfer fees average between 2 percent and 7 percent
of the home price.
5. Get your credit in order. Obtain a copy of your credit report.
6. Determine how large a mortgage you can qualify for. Also explore
different loans options and decide what’s best for you.
7. Organize all the documentation a lender will need to preapprove
you for a loan.
8. Do research to determine if you qualify for any special mortgage
or downpayment-assistance programs.
9. Calculate the costs of homeownership, including property taxes,
insurance, maintenance, and association fees, if applicable.
10. Find an experienced REALTOR? who can help you through the
process.
