If you know that you want to buy a house in the next year or sooner, then there are things you need to do in order to ensure you are able to get the best home mortgage possible. To help get you started, here are some industry insider tips:
Tip: Pull All Three of Your Credit Reports
As soon as you know that you want to buy a house, you need to pull all of your credit reports. In the United States, there are three different credit reporting agencies:
Since each of the credit reporting agencies will likely have different information about your credit history, it is vital that you get a copy of each of them. Take a close look at the reports and if you find any errors, then contest them with the reporting agency.
Tip: Don't Apply for Any New Credit Cards
Every time you apply for a credit card, your credit score goes down a few points. Since even a small drop in your credit score can change your mortgage interest rate or ability to even get a mortgage in the first place, you should not do anything that could lower your score. Even if a clothing store makes you a great discount offer if you open one of their store-branded credit cards, you must resist the temptation until after you have signed the papers for your new home.
Tip: Don't Go Out and Buy a New Car
When a mortgage lender is evaluating your ability to pay back a mortgage loan, they look at your debt-to-income ratio. To make you a favorable candidate for a mortgage, you want to have the highest income and the lowest debt amount possible. Making a major purchase such as a new car or boat will make your debt-to-income ratio plummet and can negatively affect your ability to obtain a mortgage.
Tip: Get Pre-Approved for a Mortgage Loan Before Making a Purchase Offer on a House
Finally, before you leave home to start looking for a home to purchase, first, you should get pre-approved for a home mortgage loan. Rather than a pre-qualification letter that doesn't really mean much, a pre-approval letter is proof to a seller that you are able to fund your new home purchase. Instead of applying for a home loan online, you should meet with a local mortgage broker and have them shop for the best deal that meets your home buying needs.