What do you do to clean up your credit in order to purchase a home?

Answer 1

1. Payoff or at the very minimum paydown your debt. This will help what is called your debt to income ratio. Typically, if your monthy obligations (including your mortgage payment) are more than 40% of your total gross monthly income, most lenders will either not borrow to you or hit you hard on your interest rates. So if you make $3,000 per month, your toal debt cannot exceed $1,800, including the mortgage. This will also help your credit score because the credit bureaus look at how much you use your credit in relation of total credit available. In general, keeping your balance onrevolving debt on any one card at least 50% less than the total limit will not affect your score negatively. Example: 1000 credit limit, 550 balance is much worse than lets say a 450 balance.
2.Save Save Save! Most lenders will require 2-6 months of total payment reserves in the bank for at least 2 months. if your potential mortgage payment is going to be $1200, be prepared to have $2400 in the bank for a minimum of 2 months. Make sure that if this money is a gift that the money is in the bank for a few months. Lenders are very wary of gift funds so be careful of this and be prepared to document the source of the money in case it is a large amount of cash. Having this money in the bank strengthens your loan as much as your credit. it shows that you aren't strapped for cash in cash of something comes up.
3.Clean up negative mark on your credit. This can be the most difficult part of buying a home if this applies to you. Be prepared to have a really good reason as to why you were late on that credit card payment or why you have a collection on your account. Come up with as much documentation as possible. But most of all, payoff collections and past due payments. Pull your credit a year before you think you would be buying and set a monthy and quarterly plan. Set realistic goals as how you will payoff debt, save money and stick to it. You will be in your new home in no time!

Answer 2

First get a copy of your credit report and score. The credit report can be obtained for free. Go to ftc.com for the link.

Make sure there are no errors on your report. If you find any follow the dispute procedure outlined in the link below.

Don't open or close any credit accounts right now. Pay all your bills on time all the time. Reduce the percentage of your use of your available credit lines if it is excessive right now.

These things should raise your FICO score allowing you to get a better rate.

Answer 3

Make the minimum payment on time (or before) EVERYTIME, on whatever you have purchased on credit. If you are ever late, that is a black mark. Interestingly enough, if you pay much more than the minimum or even pay off the debt, this will not improve your credit rating. Wait about a year and a half, and your credit will be golden. Also, avoid having your credit rating checked by creditors during this time, each time it is checked, it lowers your rating.

Answer 4

Run a credit report on yourself and/or spouse or whoever you are buying the home with. Close some of the accounts that you don't use anymore. Mortgage companies don't want you to overextend yourself. So, if you can't close some, ask a few to lower your credit limit. Don't close your oldest account because that might shorten your credit history. If there are any mistakes or negatives whatsoever, follow-up and see if they can be corrected. If not, at least make some comments that will be stored with your account, explaining why there were late payments, etc.

Answer 5

There are a lot of ways to improve credit. Pay all your bills. If there are any past due pay them. Always pay bills on time. Take out a small loan, maybe 2000 or 3000 dollars and then pay it off. If you have loans or student loans make it a priority to pay those off. Get a credit card but use only what you can pay off monthly or weekly. If you have credit cards already work on paying them off. Check your credit report it will tell you your credit score and give you insight on what is hurting it.

Answer 6

I would say there are no quick fixes for your credit score. I would say try to minimize your debt as much as possible and remain consistent. Don't cut up your credit cards (You never know if you'll need them for an emergency) but leave them at home when you go out. Don't make the minimum payments or you'll never lower your debt significantly, and just be on time.

Lenders will look at the minimum required at every statement to see if you can afford the house you want, but lower balances and a consistent history will help them make a favorable decision.

If you have bad credit (like my husband, thanks to his student loans) try load consolidation or rehabilitation. Thats what he did and lenders are already giving us better numbers because they saw he was making an effort. But the generosity of lenders vary.

Try to go with a local lender who is used to working with first time home buyers. Then you may not have to put up for a down payment and can concentrate those savings on reducing your debt.

Best of luck.

P.S. Watch out with applying for home loans with too many lenders over a long period of time. Mortgage applications within a 14 day period count as one application on your credit report.

Answer 7

First, make beneficial each and all the concepts on your credit record is precise. 2nd, attempt to repay all or any money owed that are at present in collections or make charge arrangements with the creditor to repay the stability month-to-month. third, any credit card it truly is over 50% of the accessible credit line must be paid right down to below a million/2 of your finished credit line. Your credit is diminished while your accessible stability is over 50% of your finished credit line. ultimately, in case you have undesirable or no credit and have no credit enjoying cards attempt to obtain 2 credit enjoying cards and make beneficial all your month-to-month money are made on time. this might help advance your credit. in case you won't be able to be approved for a unsecured credit card, obtain a secured credit card. Repairing your credit and convalescing your credit is a slow technique that takes time.

Answer 8

Get your free credit report online www.annualcreditreport.com/

make an appointment with Consumer Credit Counseling Service in your area.
www.cccsatl.org/

Answer 9

All you have to do is get a no income verification home loan. All you need is 20% down and you can get a mortgage regardless of your credit score. That's it. 20% down, and the mortgage is yours. You dont even have to show your pay stubs to them.