When the family begins to grow, it is time to find the right home. Purchasing a home is a somewhat complicated endeavor, but it does not have to be an entirely foreign process. With a little time and enough research, a person can assure that their credit is ready to stand the scrutiny of lenders.
Typically, mortgage lenders prefer a credit rating of 720 or higher to qualify for a home loan. Here are a few helpful hints to prepare a stellar credit report before purchasing a new home for the family.
Obtain a full credit report.
Everyone is entitled to one free and complete credit report from each of the reporting bureaus every year. It is a relatively simple process to complete online. An array of websites provides the ability to request a free credit report.
Make sure to only inquire about credit history when absolutely necessary. When a person’s credit reflects several inquiries, it can negatively affect their score. It is assumed that if several agencies have to look into a person’s reliability, then they may not be very reliable.
Dispute any discrepancies.
A thorough examination of one’s credit report will often uncover one or many mistakes. If the report shows information that is not even close to accurate, then it is that person’s responsibility to dispute the markings.
Though many individuals do not challenge (or even know about) errors on their credit, it can be very beneficial to follow through with an objection. The bureaus have a 30-day time limit to respond to complaints, and most people are relatively pleased with the outcome. It is worth the time to complete this step.
Maintain several tradelines.
A person needs at least three active tradelines to qualify for a home loan. Tradelines are lines of credit, such as student loans, car loans, or credit cards. They need to be active for a time in one to two years before they will reflect positively to mortgage lenders.
Leave unused lines of credit opened.
Older tradelines look better on credit history, and they are also capable of boosting a person’s overall rating. Do not close those unused credit card accounts. Leaving them opened, even if they are not being utilized, builds credit. Try circulating through several cards, and never charge more than 30 percent of the total limit.
Understand debt-to-income ratio.
Debt-to-income ratio is not only important to prospective lenders; it will help the real estate agent determine exactly what can be feasibly afforded. It is assumed that a buyer with a high debt-to-income ratio will have more trouble paying monthly payments, and lenders tend to shy away from those people.