Your home will likely be the largest purchase you ever make. Because it is such a large purchase, very few people are able to buy a home without getting a mortgage. A home mortgage is a long-term commitment and as such, the lender will perform a very thorough check on your financial situation before they commit to loaning you money. This will include reviewing your credit history, checking references and verifying income. If you are ready to buy a new Houston home and will be applying for a mortgage, here are some things you can do now to help ensure you aren’t delayed by the mortgage underwriting process.
Start by checking your credit reports. There are three major credit reporting agencies and you should request reports from all of them as they could have different information on your reports especially if there is a mistake. You are allowed to check your credit report once a year for free. The main reason to check your credit report is to look for errors. If you see something that isn’t right, notify the credit agency so it can be corrected. You may find things on your report that you have forgotten about. If there are accounts you are no longer using, don’t close them right now as that can lower your credit score but you might want to take care of them later after you buy a new house.
Cleaning up your credit report may raise your credit score if you find errors so this is a very important first step. Your credit score will be a factor when determining the interest rate you get on your mortgage so if there are mistakes that are lowering your score, handling them could raise your score and potentially save you thousands of dollars in interest over the life of your mortgage.
If your credit score is not where you want it to be, the best thing you can do to improve it is to make all of your payments on time. Continue to do this after you purchase a home as this is the most important factor on your credit report.
Prior to applying for a mortgage is not the time to make other large purchases. Your credit score is calculated by comparing how much credit you are in relation to how much credit you have. If you make a significant purchase, that ratio will change and could possibly decrease your credit score. If your credit is less than perfect, don’t assume you can’t get a mortgage. Talk to a lender to determine if you can get a mortgage now and if not, a good lender will advise you on what you need to do to improve your credit score so you can buy a home sooner rather than later.
If buying a home is one of your upcoming goals, these are important steps that will help make sure you get approved for a mortgage as quickly as possible.
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