There are some people with deep pockets that can pay for a home in full without the help of outside financing. For the rest of us, the first step to home ownership always starts with securing your financing. Securing financing can be relatively easy if you have a credit score of 700 or better. If it is below 700 then you probably have a few things to clear up. If it is below 620 then you have a snowball’s chance in hell of getting a traditional loan. If you are just shy of 620 then there are a few actions that you may want to perform ASAP to help get your loan approved.
1.Get at minimum a $500 secured credit card. Use $125 of the line of credit and make ON-TIME payments. I have seen scores jump as high as 100 points in less than 6 weeks. Results vary.
2.Contact a Credit Restoration or Settlement company. I have seen them both work wonderfully for people with a lot of inaccurate information. Generally these take a little longer like 60 days to see results. Restoration companies will ensure that your report is accurate and not adversely affecting you. Settlement companies will negotiate legitimate debts for a fraction of the balance due and a favorable notation on your file.
3.Consult with an experienced mortgage officer on your credit file. Loan officers are great resources for help guiding you through the mire of financial mess that could be your credit file. They will tell you what to focus on and what to avoid. They will tell you when your file is well enough to qualify for a loan.
4.Review your revolving credit lines. Make a list of each creditors given credit line. Now notate what 25% of that credit line is. Start bringing each revolving line of credit down to that. DO NOT PAY IT OFF!!! Paying off a line of credit removes that positive line of credit from the equation that is used to compute your credit score. Paying it off CAN hurt your credit score. I have seen it happen with a client that was instructed not to pay off some of her open lines. She didn’t qualify for a loan because of it.
5.Pay all of your bills on Lombardi Time. Okay, I am taking some liberty with that term, but do pay your bills ahead of their due date. If you are unable to do this with your current debt, then you don’t need to be buying a home, you need to be consulting with a financial professional on the best possible way to get your financial self in check. Owning a home for the long term requires financial discipline and a thorough understanding of the true costs of home ownership.
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