Why is it extremely important to check your credit before buying a home?

When you meet with an NMWelcomeHome Realtor, you will get the guidance to secure financing before thinking about the home you want. Your credit scores can help or hurt you when trying to secure the financing you need to buy the property. If you do not have a mortgage lender, NMWelcomeHome Real Estate Team will help you find the best ones that have had great success securing loans with previous clients. Mortgage lenders will look at debt-to-income ratios, employment history, credit scores, and down payment. You may have a perfect score, but a high debt-to-income ratio that will affect the loan amount you qualify for. Your credit score will also affect the type of loan you can qualify for (example: Conventional or FHA).

With that in mind, here’s a look at the steps you should take to prepare your credit before applying for a mortgage.

Look over your credit report, fix or disputeImportance of Checking Your Credit Blog Typically looking at it three months in advance is a good idea so you can correct any mistakes or pay any balances. If you know you have several issues on your credit report, it is wise to start at least nine months in advance to clear all those issues. Dispute any errors in your credit report immediately. An unpaid item that you've actually paid will need a dispute or an account showing up that is not yours are examples of disputes you need to make right away.

Have at least 2-3 tradelines. Tradelines can be any combination of credit cards, student loans, car loans, etc.) that have been active within the past 12-24 months. Getting a major credit card like a Visa or Mastercard (not a store credit card) at least six months before you apply for a mortgage is a good idea. Avoid opening new lines of credit six months before getting a loan. Yes you probably would pay cash, but use your credit card as an active tradeline. Do not charge more than 30 percent of your allowed limit and pay it off in full when you receive your bill.

Stop buying on credit. It is not wise to start purchasing new furniture and appliances before closing. Yes, you may have already qualified for a loan, but you haven't closed on the home YET. Everything you purchase on credit will affect your loan at closing. You can disqualify your loan at closing if you have gained a debt ratio above 30 percent even if you're in escrow.

Leave older credit lines open. Older credit cards are tradelines. Leave the older credit lines open even if you don't use them all the time. If you had a good account, that adds positive points to your score. Try to use those credit cards every few months and pay the balance in full when you receive the bill so those tradelines remain active. 

Avoid shuffling money around.  Leave your money and your accounts the same for at least three months. When you apply for a mortgage, you will need to provide documents such as bank statements for the last several months. Avoid shutting accounts or having large transfers from one account to the other. You will not be disqualified for a loan, but the paperwork will increase to verify shuffling large amounts of money.

Need Advice? Whether you are feeling confident to purchase or confused, contact the NMWelcomeHome Team to get you started from the point you’re at. Ready or Not, we stick with our clients from start to finish! Email homes@nmwelcomehome.com or Call Us To Get You Started  505.259.3150. Remember we work based on commission so there are no upfront costs to talk with our team.

Visit our NMWelcomeHome Webpage Today!

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