5 Tips for Getting Your Credit into Mortgage Loan-Ready Shape

Most people dream of owning a home for years before they can actually afford to do it. For those who are still dreaming due to credit issues or a fear of loans, there are tips to remember to build credit and prepare for home ownership. By following these tips, you can soon find yourself in a dream house, rather than dreaming while clicking-through Pinterest “home décor” boards.

1. Investigate Your Score Early

Credit Score Compare

Image via Flickr by Casey Serin

Credit counselors recommend checking your three credit scores at least 18 months before you want to apply for a home loan. This is because 18 months is the average time it takes to resolve any credit disputes, and to build credit notably. They also recommend checking your credit score annually, so that you never experience surprises.

However, credit applicants must be aware that the score available to them is different from the score shown to mortgage lenders. Why, you might wonder? It’s because a mortgage lender is shown a credit model that weighs the applicant’s rental and payment history more heavily than other factors (it’s 35% of your total score).

2. Consider Credit Card Matters

Credit Card

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While credit cards can be a blessing during emergencies, they should be used sparingly. Opening new credit cards can adversely affect a credit score, as can closing an account (new credit accounts for 10% of your score). The best advice is to keep all current accounts open and paid-off, or with low balances.

Your available credit-to-debt ratio is vital to a mortgage lender. By keeping credit cards paid-off, you can make sure that your score will be better (this accounts for 30% of your credit score).


3. Plan for Credit Diversity

While four credit cards in good standing is great, four different kinds of credit loans in good standing is fabulous! Try to diversify your loans by getting auto, rental, credit card, and student loans if possible over the course of your life, but not within two years of a mortgage loan. By building various kinds of credit history you strengthen your portfolio of accountability for lenders (this makes up 10% of your credit score).

4. Maintain Consistent Employment

Office

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Long-standing employment speaks volumes of a person’s character and stability to the Amerisave team and others. Those who keep one job for more than two years at a time are considered the safest borrowers.

5. Build a Credit History

Buying a House

Image via Flickr by Images_of_Money

While very little can be done to exaggerate the length of a person’s credit history, it does make up 15% of a person’s credit score. This means that people who hope to own homes one day should start building their credit at young ages. Parents should help teens to begin building positive credit scores, too.

With these five tips in mind, any person should be able to get a mortgage loan within a few years. The most important thing to remember is consistency—let it be your mantra as you build a strong portfolio for lenders.

Sources

  1. http://www.realtor.com/home-finance/homebuyer-information/getting-mortgage-loans-for-people-with-bad-credit.aspx
  2. http://lifehacker.com/5834187/10-ways-you-can-improve-your-credit-score-right-now
  3. http://www.washingtontimes.com/news/2012/oct/4/cover-story-raising-credit-score-for-a-home-loan/


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