The first step when you are getting ready to purchase a home is making sure your credit is up to par. Your credit is inversely correlated to your closing costs, interest, and overall fees associated with a home loan. The worse your credit is, the more you will end up paying. It is always advised to check your credit score for any errors. Credit bureaus and creditors can make mistakes too. By law, everyone is able to order a free credit score report once a year from Experian, Equifax, or TransUnion. If something does need fixed on your report, you can go to http://www.ftc.gov/ to dispute it.
The major factors that affect your credit score are:
- Payment History
Paying off your debt on time has the largest impact on your overall credit score. Always making paying in full helps even further.
- Credit History
The longer you have had your credit established the better candidate you are for a home loan.
- Outstanding Credit Card Balances
The outstanding balance on your credit cards should be lower than 30% of you available credit for at least 3 or more months prior to the purchase of a home.
- Types of Credit
It is beneficial to have more than one type of credit besides credit cards. Having auto loans, school loans and/or a mortgage shows that you are reliable and responsible.
- Inquires of Credit Score
Each inquiry about your score, which is not done by you, can deduct up to 15 points. So make sure it is a necessity to have it checked each time it is done so.
Once you are confident in your credit score, the next step is to make sure you have all the paperwork the lender or broker is going to need. This will include your last 2 years of tax documents, last 2 months of bank statements, last month of income statements, as well as other personal documents needed to verify your financial status. These documents can take a while to obtain so it is suggested to have them prior to starting the loan approval process.
Finding a great loan officer is easy. We have loan experts here at Griffin Funding that are happy to help you with the entire process. Give us a call if you have any questions or are ready to get started!