Six Smart Steps to Clean Up Your Credit and Get Home Financing

Getting a home loan for a new home is tougher than it has been in years.  With so many problems having resulted from the real estate lending practices of the recent past, mortgage writers are now very hesitant to take on new clients.


There are some things that you can do to increase your chances of getting funding for a new home, but be sure you know what you’re getting into, and your realistic odds of making it happen. 


Here are your 7 steps to success:


1. Clean Up Your Credit


Your credit score will have a big effect on whether or not you can get a loan for a new home.  You’re looking at a score of over 700 to qualify for most funding these days, which is very high.  There are two things you need to do, above all others:


•     Pay off collection accounts

•     Remove inaccurate negative items


Start by getting your score and your report from all three agencies, and then work your way through any problems you find.


2. Reduce Your Debt Load


If you have student, installment, car or other loans out, pay them down a bit before you apply.  Remember that many of the problems with the real estate crisis were caused when people  were given loans for a home they couldn’t afford and their debt piled up so high that they drowned in it.  You’ll have to prove to the lender that you’re not already in massive debt before they’ll take your application seriously.


3. Save a Big Down Payment


The down payment you make on the home will determine what kind of mortgage you can get.  The bigger your down payment, the better your chances of getting funding will be.  Try to save up or, if you haven’t any resources, see if there are programs available for first-time buyers.


4. Get Your Act Together


You’ll need to have documentation to get a loan and, when you want a loan big enough to get a new home, that means you’ll need a lot of documentation to do it.  Make sure you have paystubs, bank records, tax records and anything else you can pull together before you even apply.  Every bit of positive information you can get will help your cause.


5. Save Instead of Spending


Don’t buy anything expensive for a long time before you apply for a loan.  This means not purchasing anything on credit, either.  Your home purchase should be your number one priority, so you’ll have to give up some things before you’re going to have a realistic chance of getting a mortgage.


6. Be Prepared to Wait


This process can take a long time, especially in today’s economy.  Make sure you’re ready to be rejected most of the time, and don’t let that discourage you.  Don’t take bad loans because you’re impatient and make sure you’re ready to apply somewhere else when you’re turned down for the first few loans you apply for.


It is possible to get a mortgage these days with a lot of hard work and patience.  Don’t give up!


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