You have your sights set on a house that you just know would be the perfect home for you and your family, so now comes the hard part: applying for and getting approved for a home loan. Taking out a loan for a home can be scary since it is likely the biggest loan you will ever get. In order to get a home loan, you will have to put your credit and financial health on full display. There are certain aspects of your credit that a lender will be looking at when they are deciding if you will qualify. Take a look at these three components of your credit you should assess before applying for a home loan because a lender will be doing the same.
How many open accounts do you have?
If you are like a lot of people, you have several open accounts listed on your credit profile. You have an open account with a finance company, a few credit card companies, and even a few medical providers. You may think that as long as these accounts are kept current, a lender will not have a problem with so many open accounts. However, this is not always the truth. Some lenders prefer to see a credit profile with fewer open accounts because it means you have less going out every month in payments. because of this, it is a good idea to pay off those small debts and get them out of the way before you apply for a loan.
How many accounts do you have in collections?
Bills that get lost in the process of life either because you cannot pay them or simply forget them come up listed for collections with places like collection agencies. These debts on your credit report will definitely bring your score down, but even more importantly, they reflect negatively on your history as a borrower in the eyes of a lender. Before you apply for a mortgage, pull up your credit report and see if there are any accounts in collection. If there are, do what you can to get those paid off.
How is your payment history?
Having a good payment history on any account is a good thing when you apply for a home loan. If you have borrowed money and then soon after paid it back, you may not have given the process enough time to allow a good credit history to show up on your credit report. If you have little payment history on your credit report, it can be a good idea to open a small loan account or credit card account and make the small monthly payments required for a while.Share
22 April 2017
I always wanted to buy my own home and after saving enough money for a down payment, I decided that it was time. Before I started looking at houses, I talked with a loan officer about financing. I wanted to know how much money I could borrow so I could look at houses in that price range. I was very happy after my meeting at the loan company and I was ready to start house hunting. My name is Jarod Spangler and I'm now a homeowner. If you have the dream of owning your own home, I think you'll find my blog of help to you. I've documented my journey of saving money, securing a loan and purchasing a house. To help you become a homeowner too, I'm offering advice and tips of things that I've learned along the way.