Think that you’re ready for the responsibility of owning a new home? Maybe you’ve tied the knot and you’re looking for the right place to start a family. Whatever the case, stop right now. Before you contact a realtor or start looking at homes for sale, you need to make sure that you’re the most attractive candidate for lenders. Why? Simply put, if your credit isn’t up to snuff, you won’t get the loan you need. Possibly even worse – you’ll get a loan, but the interest will be horrifying and you’ll end up paying far, far more than you should.
Get Your Credit Report
The first thing you need to do is get a copy of your credit report. You’re entitled to one free copy every year from each of the major credit bureaus (TransUnion, Equifax and Experian). Why get a copy from all three? Isn’t it the same information? It’s supposed to be, but it isn’t. You’ll find that each report differs, sometimes substantially. One account might not be shown on the report from one or even two bureaus.
So, what are you looking for? Anything that might be considered a black mark. This can be anything from maxed out credit cards (particularly those you got as a student and weren’t able to pay off), to closed accounts. As a note, don’t look for your credit score on these reports. It’s not there, nor are the bureaus required to give that information to you. It is available, but you’ll have to pay for it. It’s simpler just to start cleaning things up before you shell out any more cash.
You should also keep an eye out for any debts listed under your name that don’t belong to you. These must be disputed with the bureau so they can be removed. Think it won’t happen? It does more than you might think.
The Next Step
Now that you have your reports, it’s time for the next step. Take action on anything that you can. Pay off credit card debts. Get in touch with creditors and make payment arrangements. The goal is to repair the damage caused by late payments or nonpayment.
If you have a lot of credit card debt, consider paying off several smaller cards so that you’re left with only one or two higher-balance cards. Not only will the paid-off balances boost your credit, but you’ll find life is a lot easier to manage with fewer monthly payments, even if paying off those cards didn’t put a huge dent in your overall debt.
Even if you can’t really afford to pay off cards completely, focus on getting the balances down. You want to be at about 30% of your limit on each card. So, if your card has a $2,000 balance, you should have no more than about $600 on it.
No New Debt
It’s tough, we know, but you need to resist the temptation to create any new debt right now. That means no applying for new credit cards. It means no new cars. It means not opening a line of credit at your favorite clothing store. Not only will this help ensure that you’re not creating yet more debt for a lender to sift through when considering your mortgage application, but it stops inquiries into your credit. Every time you apply for credit, whether it’s for an auto loan or a credit card, the lender checks your credit.
Get Financing in Hand with a Long Island Mortgage Broker
Once you’ve cleaned up your credit and are a financially attractive candidate, it’s time to shop for a mortgage loan (before shopping for a home). Ideally, you’ll work with a Long Island mortgage broker capable of providing you with what’s sometimes called a TBD mortgage (to be determined). In this instance, you go through all the steps you would for an actual mortgage, including having the loan authorized by an underwriter. The only difference, and what makes it “to be determined”, is that there’s no specific property attached to it. Your mortgage broker will let you know the loan amount you’ve been approved for, and you can start shopping. Once you find a home, the loan is finalized through your Long Island mortgage broker, and you buy the property.
If you’re ready to start the process of buying a home and have already taken care of your financial homework, get in touch with us at Reliant Home Funding and learn more about how a Long Island mortgage broker can speed up the buying process.
Gregory A. Topal
Gregory is Co-Founder and Licensed Loan Originator at Reliant Home Funding, Inc., a Long Island based Mortgage Company. Gregory currently holds a Mortgage Loan Originator License in NY, NJ, CT, CO, FL and PA and plays an active role in running the company. (NMLS #: 38684)
Gregory was raised in Long Island, NY and attended SUNY Oneonta receiving a Business and Marketing degree in 2004. Shortly after graduating he started a career in Real Estate and has been fortunate enough to advance his career throughout the years. He believes his success can be attributed to consistently striving to exceed the expectations of his clients and colleagues.