A building loan needs strong groundwork if it is to pay dividends over time. Below are a few brief tips to make the home loan or refinancing process easier.
Prepare ahead of time. Even in the best-case scenario, wherein you have relatively little debt, a stable income, and a solid credit score, the home loan process can still take several weeks to reach completion. Be ready to wait several months on the pre-approval process alone if your circumstances are less than ideal. Be aware that multiple credit score inquiries resulting from mortgage “rate-shopping” won’t harm your credit score as long as they happen within a 14-day window.
Clean up your credit report. The Federal Trade Commission estimates that as of 2013, as many as 25 percent of people had errors on one of their three credit reports (Equifax, Experian, TransUnion) that could lower their scores. Be sure to diligently review reports from all three agencies and follow the FTC’s steps for disputing errors at: www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports.
Assess your cash flow. When it comes to investing in a home, a sustainable and predictable income can be one of your greatest assets. While it is important to develop credit effectively by maintaining active accounts and paying off balances on time, throwing off your debt-to-income ratio by applying for new cards prior to shopping for a home loan can actually harm your score. And, of course, managing debt responsibly means you will have more flexibility to make a larger down payment.