First time home buyers worried about their credit scores and the ability to get approved for a first-time mortgage should take plenty of steps to address those concerns before loan paperwork is filed.
It is a very good idea to consider preparing for your mortgage loan a full year ahead of time so you can work on credit issues such as on-time payments, credit card balances, etc.
First-Time Home Buyer Credit Advice: Lower Your Credit Card Balances
Your credit cards can be an effective tool for establishing credit, but you have to know what the lender looks for in that credit to justify approving the home loan.
The older your credit is, the better, but it’s also best to pay down the balances so you are not carrying too much of your credit limit in the form of debt.
Don’t close those old accounts-the older your credit cards are the better that looks to the lender. But don’t carry high balances, either.
Avoid Certain Kinds Of Credit
Store credit cards have a bad reputation among some in the lending industry; it’s best to make a policy of not opening new store card accounts while you are preparing for your home loan.
Do Not Count On Credit Card Cash Advances
There are two reasons not to choose a credit card cash advance when buying a home, especially if you are feeling tempted to use those advances toward your first home down payment.
The first reason is the lender is required to keep track of your creditworthiness until the closing date on your new home. A cash advance from a credit card may be a red flag to the lender depending on circumstances.
The second reason is that you are not permitted as a first time home buyer or even as a repeat buyer to use cash advances, payday loans, or other non-collateralized debt as source funds for your FHA mortgage loan down payment.
Don’t Pay A Third Party For “Credit Repair”
Common credit repair scams include promises to remove all negative credit information from your credit report. You should know that it is impossible to remove accurate information of any kind from your credit report in the guise of “credit repair”. Accurate information can and will remain on your report for a specified amount of time.
Learn more about FHA home loans today.