The prospect of buying a home is an exciting one. However, it takes careful planning to pull it off successfully. In addition to saving money for a down payment and closing costs, you have to make sure you have the ability to get a home loan.
There are several things you can do while you are saving up to improve your chances of being approved for a mortgage. You should start saving and planning at least a year before you plan to buy a house. During that year there are many things you should do to make sure you can get the loan you need.
The first thing you need to do is make sure your rent is paid on time every month. Your utilities should also be paid on time every month. Your bank account also needs to remain in good standing throughout the year, with no negative balances. Lenders tend to look at these things, especially if you don’t have a lot of other credit sources.
The next thing you need to do is make sure you don’t have anything in collections. If you have medical bills or other collection efforts going on, you need to take care of those within the year before you buy a home. They need to be completely paid off. While they will show up on your credit for seven years, they will show as paid in full, which improves your overall rating.
You will also want to make sure that any credit accounts you have been given are in good standing. This includes student loans, credit cards, car financing, and other credit lines. You will likely need to make a minimum monthly payment to keep them in good standing. This should be done throughout the year to make sure your credit score is as high as possible.
Finally, if you don’t have a lot of credit, you should make an effort to get some. If you have no negative credit, you should be able to qualify for a credit card. The best way to use a credit card to build up your credit is to use it for daily necessities. Budget how much your groceries will be, and spend that amount on the credit card. Then, at the end of the month, pay that credit card off in full. You will avoid paying much interest, and you will get a very high credit score from the bank sponsoring the credit card. The more good lines of credit you have the better, so if you are starting out with no credit you may consider getting more than one credit card from more than one bank.